There are a number of reasons why the SCL worked and PC didnt. We have discussed all the reasons PC failed including passenger train losses, too many track miles, loss of business, labor agreements, mismanagement, etc.
Let's look at SCL.
In 1961: In 1966
Tons Revenue Net Tons Revenue Net
SAL 51m $157m $12m 61m $188m $16
ACL 54 $162 $10m 75m $216 $22
PRR 153m $820m $3m 183m $908m $45m
NYC 123 $612m $-12m 139m $670m $50m
I couldnt find the New Haven data in my Moody's, but my guess is they were bleeding $$$. The PRR and NYC were not healthy in the early 60's and why they showed profits in 1966 is beyond me. Perhaps there was some polishing of the books to make the merger look good.
Clearly the south was in growth stage, particularly the ACL as their tonnage grew by nearly 40% in the 6 years.
While the SCL had passenger trains, they did not have commuter trains to contend with and my guess is that their passenger operations were much more cost efficient than PC. People just were not traveling by train from New York/Washington/Philly to Chicago/St. Louis in the late 60's while people WERE traveling by train from those markets to Florida. Dont know why but they were.
There were fewer branch lines on the SCL, one theory is that the civil war destroyed much of the redundant railroad infrastructure in the 1860s...not sure if that is accurate or not, but few branch lines certainly helped.
No doubt there was a smoother integration of SAL and ACL than of the PC components. That was probably huge.
My guess is that PC might have had a chance if New Haven wasnt forced upon them at the alter. Not much of a chance, but with proper care and feeding PC might have made it.
Ed
MP173My guess is that PC might have had a chance if New Haven wasnt forced upon them at the alter.
The New Haven was a millstone around the Penn Central's neck.
The ACL still had several branches in Florida, but only the lines to Naples and Sarasota still had passenger service, besides the lines into St. Pete and Tampa. By the way, did you ever look at how the last passenger line into St. Pete wandered around?
It did not take long for the SCL to "rationalize" many of its lines, especially in Florida, and, after the inception of Amtrak, abandon quite a bit of track that had carried passenger trains through 30 April-1May.
Johnny
John WR MP173My guess is that PC might have had a chance if New Haven wasnt forced upon them at the alter. The New Haven was a millstone around the Penn Central's neck.
It also didn't help that PC's management, rather than working together, split into two warring factions (former PRR vs. former NYC) and the very high ups seemed more interested in the Corporations non-rail businesses (Real Estate, ect.) than fixing the schism..
"I Often Dream of Trains"-From the Album of the Same Name by Robyn Hitchcock
One of the biggest problems with the Penn Central creation was that it merged two parallel railroads who served the same industries and towns.
carnej1It also didn't help that PC's management, rather than working together, split into two warring factions (former PRR vs. former NYC) and the very high ups seemed more interested in the Corporations non-rail businesses (Real Estate, ect.) than fixing the schism..
I think that is a perceptive observation and a comment on what can happen in private or public enterprises.
cacoleOne of the biggest problems with the Penn Central creation was that it merged two parallel railroads who served the same industries and towns.
I don't see how that particular factor was a problem. It seems to me that merger should have allowed elimination of many duplicate services.
PS. Of course from the very beginning of the Broad Way of Public Works the intent was to compete with the Erie Canal. And that competition continued with the Pennsylvania Railroad building the Horseshoe Curve and then acquiring lines west to Chicago and the New York Central's water level route to the Windy City.
cacole One of the biggest problems with the Penn Central creation was that it merged two parallel railroads who served the same industries and towns.
Yes but so did SCL.
Modeling the Pennsylvania Railroad in N Scale.
www.prr-nscale.blogspot.com
CSSHEGEWISCH Prior to Hurricane Agnes, Erie Lackawanna's management felt that they could successfully re-organize outside of the early proposals for Conrail. EL took a big hit from Hurricane Agnes and management basically tossed in the towel as far remaining outside of Conrail.
Prior to Hurricane Agnes, Erie Lackawanna's management felt that they could successfully re-organize outside of the early proposals for Conrail. EL took a big hit from Hurricane Agnes and management basically tossed in the towel as far remaining outside of Conrail.
They wouldn't have made it a decade. The core of their traffic base, Ford in Mahwah, steel in Youngstown and UPS would have gotten clobbered. Mahwah closed, steel in Youngstown died and a patched up Conrail would have stolen the UPS traffic with faster service.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
carnej1and the very high ups seemed more interested in the Corporations non-rail businesses (Real Estate, ect.) than fixing the schism..
Because selling real estate was what was keeping the boat afloat. Guys who wanted to invest in the RR were just in the way. Sell the RE, net goes to bottom line, stock goes up, everyone's happy.
MP173Clearly the south was in growth stage, particularly the ACL as their tonnage grew by nearly 40% in the 6 years.
Railroads didn't need permission to grow, but did to shrink....and it was hard to come by.
MerrilyWeRollAlong While over regulation was certainly a major contributing factor, it would be foolish to forget why railroads were over regulated in the first place. The out-dated regulations were the result of railroad management practicing destructive business practices. Charging extremely high rates to farmers, holding shippers hostage, manipulating stocks, stealing investors money, etc were the reasons why railroads were over-regulated. Plain and simply there was a time when railroads were the most powerful corporations in America and few rotten apples took advantage of that power. As highways and airlines came into their own, the railroads unfortunately continued to pay the price of the sins of their forefathers. I think the best analogy to describe the battle to dergulate the railroad industry is the paroling a convicted criminal. Railroads were convicted for committing a variety of crimes at the end of the 19th Century, were sentenced to a life of regulation and are now asking for a parole. Has the convicted changed his ways? Until the collapse of Penn Central and the creation of Conrail, the answer to that question was "No. Once a criminal, always criminal." Here, regulation was born out of sin. Forgiveness and trust was and still is hard to come by.
While over regulation was certainly a major contributing factor, it would be foolish to forget why railroads were over regulated in the first place. The out-dated regulations were the result of railroad management practicing destructive business practices. Charging extremely high rates to farmers, holding shippers hostage, manipulating stocks, stealing investors money, etc were the reasons why railroads were over-regulated. Plain and simply there was a time when railroads were the most powerful corporations in America and few rotten apples took advantage of that power. As highways and airlines came into their own, the railroads unfortunately continued to pay the price of the sins of their forefathers.
I think the best analogy to describe the battle to dergulate the railroad industry is the paroling a convicted criminal. Railroads were convicted for committing a variety of crimes at the end of the 19th Century, were sentenced to a life of regulation and are now asking for a parole. Has the convicted changed his ways? Until the collapse of Penn Central and the creation of Conrail, the answer to that question was "No. Once a criminal, always criminal." Here, regulation was born out of sin. Forgiveness and trust was and still is hard to come by.
Oh, good grief! Where do I start with this one?
This is an ideologue's view of the history of government economic regulation of the railroads. "Regulation was born out of sin"? My left foot! Faith has its wonderful place with regards to the human soul, but it is out of place in economic analysis. Let's stick to facts.
Niether the original Act to Regulate Insterstate Commerce of 1887 nor the Transportation Act of 1920 was punative in intent. They were simply attempts by legislators and other politicians to impossibly alter economic realities that they didn't begin to understand. They begat fool's errands that harmed the people of the United States.
And that's where I'll start.
It is important to realize that the economic regulation of the railroad industry did far more than harm the railroad corporations. It greatly harmed the nation's economy and, as a direct result, degraded the lives of the nation's people. Regulation prevented the most efficient transport and distribution of goods. That raised the cost of those goods. It meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine.
If regulation was punative, which it wasn't intended to be, the burden of the punishment sure fell on millions of innocent people.
Were there swindles in railroad finances? Sure. There are swindles today. Here in Illinois we have our share. Largely in government. It wasn't too long ago that the head of Metra, the government commuter rail authority, stepped in front of one of his own trains to commit suicide after being caught with his hand in the cookie jar. A current scandle involves administrators of the Chicago Public Schools filching money from a fund set aside to make sure impoverished children are fed a good hot lunch.
The reasonable response to these modern day transgressions is to prosecute and imprison the wrong doers. No one should punish all commuter rail authorities or all schools for what some individuals did. Especially since doing so would inevitably punish the commuters (innocent) and the students (innocent children).
It was the same with the past railroad financial scandles. Go after the people who did it and put 'em in prison. But don't set up some unworkable economic regulatory scheme. The legislators at least got that right and didn't apply group punishment - something that you seem to desire and approve. The legislators did put in an unworkable economic scheme, but they had enough sense not to do it as group punishment for the "sins" of a few individuals. Again, the original act of 1887 and the act of 1920 were not intended to be punative in any way. The 1920 act was really obsolete when passed, stupid beyond all belief, and totally unworkable. But it was not intented to be punishment for past "sins". The 1920 act was what strangled the railroads and drove them to finacial perill, harming the nation's people as it did so. The Federal Fools left it largely in place for sixty years.
As to charging the farmers "extremely" high rates: That's "Horse Hockey".
Where, when, and how much too much? You don't say. You just sling mud.
How much is "too much"? How do you know what the rail charge "should" have been? You can't answer any of these questions becuase you can't possibly determine what the "correct" rail charge should have been. No one can do that. Rail rates fell like a rock in the last quarter of the 19th century. Which is when the original act of 1887 was passed. It wasn't passed because rail rates were felt to be "too high". It has strong hints of being predatory regulation, that's regulation meant to protect the railroads from rate competition as opposed to protecting the consumer. (read "The Wealth of Nations" by Adam Smith for further information on predatory regulation.)
Yes, there was the Grainger Movement. Financially distressed farmers complained that the railroads charged too much. But then they complained that everyone charged too much. Farm equipment dealers, the banks, the insurance companies, the grain dealers -- they were all just so evil.
Nope, the farmer members of the Grainger Movement - which certainly did not include all farmers - were looking for someone else to falsely blame for their financial difficulties. The railroads, and anyone else they could think of, would do just fine.
Now go repent and sin no more ye knave of economic misinformation.
Nice rant.
C&NW, CA&E, MILW, CGW and IC fan
schlimm Nice rant.
Thank you. I wouldn't have expected you to understand it. But it is true. And the result of several decades of actually trying to understand the subject.
greyhounds schlimm Nice rant. Thank you. I wouldn't have expected you to understand it. But it is true. And the result of several decades of actually trying to understand the subject.
I understood what you wrote and agree with a good deal of it. I called it a rant because of your dismissive, sarcastic tone, as above. You have a univocal view on regulation that tends to overlook the subtleties of history in the service of consistency.
schlimm greyhounds schlimm Nice rant. Thank you. I wouldn't have expected you to understand it. But it is true. And the result of several decades of actually trying to understand the subject. I understood what you wrote and agree with a good deal of it. I called it a rant because of your dismissive, sarcastic tone, as above. You have a univocal view on regulation that tends to overlook the subtleties of history in the service of consistency.
Thanks to Chris / CopCarSS for my avatar.
greyhounds t is important to realize that the economic regulation of the railroad industry did far more than harm the railroad corporations. It greatly harmed the nation's economy and, as a direct result, degraded the lives of the nation's people. Regulation prevented the most efficient transport and distribution of goods. That raised the cost of those goods. It meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine.
t is important to realize that the economic regulation of the railroad industry did far more than harm the railroad corporations. It greatly harmed the nation's economy and, as a direct result, degraded the lives of the nation's people. Regulation prevented the most efficient transport and distribution of goods. That raised the cost of those goods. It meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine.
At the same time the people's lives were being "degraded" we were achieving a historically high standard of living. In part this was because of new labor saving appliances in our homes. No doubt the laws which provided for regulation of railroad rates had serious faults. But is there evidence to show a decline in the number of washing machines sold following passage of the legislation?
John WR At the same time the people's lives were being "degraded" we were achieving a historically high standard of living. In part this was because of new labor saving appliances in our homes. No doubt the laws which provided for regulation of railroad rates had serious faults. But is there evidence to show a decline in the number of washing machines sold following passage of the legislation?
What legislation are you talking about?
Anyway, it doesn't matter whether washing machine sales declined, went up, or moved sideways. What matters is that the economic regulation of railroads, and other transportation, introduced inefficiencies in the logistics systems in the US.
These inefficiencies increased the costs of goods, such as washing machines. This meant that a number of people who would have liked to purchase a washing machine could not do so because the cost of such a machine was higher than it otherwise would have been due to the regulatory caused inefficiencies. People's lives were degraded due to the economic regulation of transportation.
What part of this do you not understand?
When the Transportation Act of 1920 was passed the majority (65%) of US households couldn't have used a washing machine if they were able to afford one. They didn't have electricity. As the country got hooked up to the grid people bought electric appliances. But they paid a higher price for those appliances than they otherwise would have because the logistics system was not allowed to be efficient as it could have been. The higher prices for the appliances meant that some folks were priced out of the market and had to do without. This regulatory induced added cost reduced the living standards.
As to that US standard of living, yes, it was relatively high. Most of the US economy was free market capitalism. That economic system has consistently been shown to produce the highest level of prosperity. But rail transportation was not allowed to operate in a free market. This drove costs up and, as a result, the standard of living was lower than it would have been absent the economic regulation of railroads.
Do you disagree with any of this?
greyhoundsWhat part of this do you not understand?
The legislation I refer to is the Transportation Act of 1920.
What I don't understand is the empirical evidence that in fact many people were priced out of the washing machine market because of that legislation. You have asserted that because of the legislation some people became unable to afford to buy a washing machine. I request the evidence to support your contention.
for greyhounds, like many others, an assumed truth needing no proof is: "Most of the US economy was free market capitalism. That economic system has consistently been shown to produce the highest level of prosperity. But rail transportation was not allowed to operate in a free market. This drove costs up and, as a result, the standard of living was lower than it would have been absent the economic regulation of railroads. Do you disagree with any of this? " So John WR, I'm guessing the burden of proof is on you.
Schlimm,
Here are Greyhouns's words: " It [economic regulation of the railroads] meant, for a very real example, that some families could not afford washing machines. (Again, this is very real.) That generally meant that the woman of the house had to drudge away on a washboard long after she could have been freed from that arduous task by a simple machine. (The underlining is added).
The number of families who could not afford a washing machine is an empirical question. Since Greyhounds asserted a fact I believe it is up to him to present evidence to sustain his assertion.
I do believe that Federal Legislation to regulate the railroads during this period was flawed at best. However, Martin Albro has pointed out that the railroads themselves were never really able to justify their rates and Congress was particularly reluctant to believe that it cost them more to haul freight a relatively short distance than it cost to haul that same freight a long distance.
Murphy SidingI'm curious what some of those subtleties of history might be, that greyhounds is overlooking, that you think had important effects on railroad regulation. Seriously.
Subtleties that led to the major regulatory acts up to 1906 included discriminatory tariffs, rebates, monopolies, and the lack of open books and uniform accounting standards. It is likely that the regulations became counter productive as competition on a major scale developed. But the contention that regulation was destructive from the ICC Act onward is hardly as settled an issue as greyhounds seems inclined to present it.
schlimm Murphy SidingI'm curious what some of those subtleties of history might be, that greyhounds is overlooking, that you think had important effects on railroad regulation. Seriously. Subtleties that led to the major regulatory acts up to 1906 included discriminatory tariffs, rebates, monopolies, and the lack of open books and uniform accounting standards. It is likely that the regulations became counter productive as competition on a major scale developed. But the contention that regulation was destructive from the ICC Act onward is hardly as settled an issue as greyhounds seems inclined to present it.
Murphy Siding I see what you're saying. Perhaps part of the regulation problems down the road could have been attributed to unintended consequences.
well put. That and no sunset provision when the need was no longer relevant.
John WR greyhoundsWhat part of this do you not understand? The legislation I refer to is the Transportation Act of 1920. What I don't understand is the empirical evidence that in fact many people were priced out of the washing machine market because of that legislation. You have asserted that because of the legislation some people became unable to afford to buy a washing machine. I request the evidence to support your contention.
OK.
1) All costs of producing and distributing a washing machine will be borne by the end users. In this case that would be the family purchasing the washing machine.
2) There is no fixed level of demand for washing machines. Everybody may want a washing machine, but the actual number of machines sold at $400/machine will be greater that the number sold at $500/machine. Conversely, the number sold at $300/machine will be greater than the number sold at $400. The number of machines not sold as the price increases represents the number of families priced out of the market due to the higher cost of purchase. (This is the demand curve.)
3) Producers of washing machines seek to maximize their profits.
4) Profits are maximized when marginal costs are equal to marginal revenue. This means the producer will add capacity and labor to build more washing machines up until the point where the additional revenue from the extra sales falls below the additional cost of the added capacity and labor. Implicit in this is that the producer will reduce the price in order to secure more sales volume. Profitability is margin multiplied by volume. The margin can come down (it can’t go to nothing) as long as the volume increase makes up for the margin decrease. The producer is concerned about the overall profit, not the margin on each machine sold. (The producer will want as much margin as he can get, along with as much volume as he can get.)
5) The expenses of moving everything around, along with warehousing/storage, are included in the costs that the end users must bear. These expenses are part of the product’s cost. Building a washing machine requires a lot of moving things around and keeping them in storage. You need copper for the motor. You have to move the copper from the mine to the smelter. Then it needs to go to a wire factory. Then it needs to go to an electric motor factory. Then the motor needs to go to the washing machine factory. Then the washing machine needs to go to a distribution center. Then it needs to go to a store. Then it needs spare parts.
Repeat the process with everything in the washing machine; steel, rubber, etc. It adds up.
6) The more efficiently all this moving and storing can be done, the lower the cost of producing the washing machine. A lower cost of production will be a strong incentive for the washing machine producer to reduce the consumers’ price in order to gain more sales volume. The producer’s marginal cost will go down with improved logistics efficiency. This will reduce the marginal revenue required to make marginal cost equal to marginal revenue, which is where the producer wants to be in order to maximize profits.
7) A lower price due to improved transportation/distribution efficiencies will mean that more families can buy washing machines. And fewer families will be priced out of the washing machine market.
8) Got that?
So, just how did the Transportation Act of 1920 cause increased transportation/distribution cost to the washing machine industry? Thereby forcing lower income people to be priced out of the washing machine market.
Well, my reading of that act is that it was set up to protect inefficient rail transportation. The only way to protect the inefficient rail transportation producers was to restrict the efficient rail transportation producers. And that’s what happened. To the detriment of the American people.
The most salient example I can think of is my often cited “In the Matter of Container Service”. (173 ICC 377) decided by the commission in 1931 while operating under the 1920 act.
Before the development of the internal combustion engine and the highway motor truck the best the railroads could do was loose car railroading. Loose car railroading is inherently inefficient, slow, unreliable, and expensive. It cannot be fixed. In 180 years of railroading no one in the world has come up with a way to make a loose car system efficient, fast, reliable, and inexpensive. Focused management can make marginal improvements, but they cannot change the nature of the beast. The deficiencies are inherent.
A slow, unreliable and expensive transportation system increased the costs for the washing machine producers, which forced up the prices to consumers, which then forced some consumers out of the market. Because of such a system the producers had to maintain larger inventories of stock. This “safety stock” was necessary because they couldn’t rely on a shipment of needed parts to arrive on a schedule. If they ran out of electric motors they couldn’t assemble washing machines and the factory shut down. Please remember, this was not a deficiency in railroad management. Railroad management could not fix an inherent problem. It cost money to carry inventory, the more you carry, the greater the cost. And the cost was eventually paid by the end consumer. Loose car railroading existed for one reason. It beat the Hell out of the cost of moving the freight by the only alternative, which was a team of horses pulling a wagon.
When a decent motor truck was developed, around 1920 and coincident with the Transportation Act of 1920, this all changed for the better. Railroads, lead by the New York Central, realized that the motor truck could eliminate many of the inefficiencies of the loose car system by enabling unit trains of containers operating from origin rail terminal to destination rail terminal. Pickup and delivery of freight was by motor truck. This eliminated the expensive, unreliable rail terminal operations and provided a reliable scheduled service that allowed manufacturers to reduce the amount of inventory they carried.
By now, you should understand why this would make washing machines more affordable to the American people.
The dang government’s own study showed that the intermodal container system reduced the New York Central’s cost by 75%. That’s not a typo. What had cost the railroad $1.00 to move in the loose car system cost it $0.25 to move with the new container system. Most of these savings were passed on to the railroad’s customers. But the railroad managed to hang on to about 1/3 of the cost reduction. The benefits to the American people (including potential washing machine purchasers) are obvious.
So what did the government fools do? They said no way.
They ordered the railroads to increase the container rates to non completive levels. Now think about this silliness. The Federal Government ordered corporations to increase their prices. Remember, all costs are paid by the end users. So the government effectively ordered an increase in the price of washing machines. Which inevitably meant that some people had to forego the purchase of a washing machine.
Why would the commission do this? Well, they were protecting the inefficient. Really bad idea. But it came from congress, so what do you expect?
Any further questions?
Hey look guys, this whole discriminatory tariff, rebate, monopoly, the railroads couldn't "justify" their rates, etc. thing is a bunch of hooey.
I can answer and refute this stuff. But I'm not going to devote my life to this forum. I'll get to it, but I've got other things to do. You just throw out these tired old unfounded allegations and I've got to write thoughtful responses.
You're just repeating the same old false accusations and I've got to refute them. That takes some time on my part. Meanwhile, I do have a life and I'm going to lead it. So be patient. When I have time I'll be glad to point out why you're wrong.
Thank you, Greyhounds, for your cogent statement at 9:17 (MT) p.m. today.
greyhounds Regulation was a terminal illness for the US railroads. But like cancer in humans, it affected different railroads differently. The Southern did RELATIVELY well because it served a geographic area experiencing good economic growth, it had more marketing smarts than most other rail lines, and it was willing to fight a Texas chain saw caged death match with the regulators through to the Supreme Court if need be.
Regulation was a terminal illness for the US railroads. But like cancer in humans, it affected different railroads differently. The Southern did RELATIVELY well because it served a geographic area experiencing good economic growth, it had more marketing smarts than most other rail lines, and it was willing to fight a Texas chain saw caged death match with the regulators through to the Supreme Court if need be.
Great, very vivid description of Southern's attitude toward regulation!! I can just picture D. W. Brosnan with a chainsaw, going after the ICC.
GP-9_Man11786 cacole One of the biggest problems with the Penn Central creation was that it merged two parallel railroads who served the same industries and towns. Yes but so did SCL.
True, but SCL's territory was nowhere near as overbuilt for the traffic of the time as Penn Central's. And nowhere in SCL's territory was there the equivalent of the area between New York City and Buffalo, with 7 or 8 railroads competing for the available traffic.
Our community is FREE to join. To participate you must either login or register for an account.