Could have the SP survived without UP

[gabe]

Right now there is an excellent forum discussion concerning the current state of UP and some of the problems it is facing: “Union Pacific.” From what I know of UP's situation, SP is very related to their problems.

In the “Milwaukee Road” thread, we discussed if the Milwaukee Road could have made it if . . .

I think it would be interesting and instructive to kind of do the opposite by discussing whether the SP could have survived if not . . . (namely if UP, or someone else hadn't absorbed it). My understanding is that it was really on the ropes when UP bought it and I don’t think it can be argued that its physical plant was in bad shape.

I have recently read a very interesting article on the SP and its fall from grace, and I am not sure the answer to this question is yes or no. But, I think addressing it will be interesting.

Gabe

[mudchicken]

Short answer: NO

Rio Grande and Anschutz could not turn it around, what makes one think it could survive on it's own...

SP's awful corporate culture and arrogance are as much to blame as one or two people at the top. Glad that Shouldn't Paint So Fast (SPSF) did not happen. Krebs got to see what pride and hustle got you after he escaped SP.

[Randy Stahl]

I think as a class 2 regional it could have done fine.
Randy

[edblysard]

Not in its last form..it would have been chopped up into regionals and short lines, then bought piecemeal by the other class 1s...

And yes, thank the powers that be the SP SF merger went on the rocks..
I have yet to meet a former Santa Fe employee who didnt love working there.

Ed

[dldance]

One must also ask the question about what would the UP be without the SP. In spite of teething problems of great magnitude the SP added a great revenue stream in the chemical corridor to UP - not to mention the now valuable sunset route.

dd

[CSSHEGEWISCH]

SP/D&RGW did have a few strong assets, such as the chemical corridor mentioned above and mineral traffic from Colorado, but the auto and lumber traffic were both in a serious decline. It could be argued that the SPSF merger turndown saved Santa Fe, since I don't think that Krebs could have done to SP what he did to BN after the BNSF merger.

[Anonymous]

QUOTE: Originally posted by Randy Stahl

I think as a class 2 regional it could have done fine.
Randy

[#ditto] SP was doing just fine till UP [:(!][V] stuck their grubby hands in the situation. Look at what has been happening in Texas,especially in the Gulf Coast area,and the chemical companies that are there.

[gabe]

QUOTE: Originally posted by cnwfan11

QUOTE: Originally posted by Randy Stahl

I think as a class 2 regional it could have done fine.
Randy

[#ditto] SP was doing just fine till UP [:(!][V] stuck their grubby hands in the situation. Look at what has been happening in Texas,especially in the Gulf Coast area,and the chemical companies that are there.

Marough?

[espeefoamer]

With better management SP could have survived.The way it was managed towards the end it wouldn't have lasted much longer.Unfortunately, I agree with edblysard. SP would have been broken up and bought piecemeal like Rock Island was[:(].

[broncoman]

I have no doubt that the above is true, that SP was in dire straights near the end, but where did they come up with enough capital to purchase the new motive power that they did (SD70s, AC44, C44-9W) near the end. I would reason that they made the most of their motive power for as long as they could, but wouldn't they have to be able to utilize the new units handily to stay solvent especially if they were on the brink?

Dave

[Anonymous]

I agree with espeefoamer completely, but with a slight change in terms. It's not a matter of better management, it's a matter of management that didn't want to have the road survive. I firmly believe that Southern Pacific's management was TRYING to kill it. Remember that there was a lot more to the S.P. than trains. Upper management wanted out of the transportation business so they could concentrate their efforts on more profitable ventures, like real estate. As to the new motive power purchased just before the end, I've always believed that a deal had already been made with the U.P. and that the new power was simply a part of it. It was a deal sweetener. So the question remains: Could the S.P. have survived without the U.P.? Sure, if it had wanted to. Would it have? No. Not without management comitted to saving it. --JD Nomad

[jcavinato]

To securities analysts it appeared to be a conscious neglect and destruction by the "management." at the time.

True, with the above comment about never having met an ATSF employee or former one who didn't love that road.

[MP173]

I never lived anywhere near the SP, never invested in it, and never really had much interest in it, so my opinion will be of an outsider.

That being said, one of the most influential weeks of my young railfan life was during the summer of 1972 when I was at Arkansas State University for a basketball camp. From my dorm room I could see both the Frisco and Cotton Belt mainlines. I went from seeing 2 trains a day on the Mattoon - Evansville branch to many trains. So, I develope an interest in both lines.

As I understand it, when deregulation hit, SP really got hammered. The solid trains of lumber out of the northwest had to be pulled all the way to SoCal and then all the way to East St. Louis for interchange with eastern carriers. Other carriers were much more competitive both with service and cost.

Imagine having to go nearly 1000 miles south before heading east!

I would suggest to you a great book on the SP/Cotton Belt, written by Fred Frailey. It is Blue Streak Merchandise. The book covers the history of the BSM and the hoops the SP jumped thru to get the train across the rails.

In my aspects, the story of the BSM is very similar to the story written today by Fred Frailey about the UP and the UPS "bullet train."

Anyway you look at it, the SP was behind the 8ball. To compete against the UP's Central Corridor meant handing freight off to DRGW and then again at Denver to either the ROCK or to BN.

When UP purchased the WP, the handwriting was on the wall. Plus the UP's purchase of MP gave it a reach to both Chicago and Texas.

I guess SP finally got to Chicago sometime in the 80's, but it was by trackage rights, or via the old Gulf Mobile and Ohio. Neither routing would have been good.

I read in the UP article that they are running up to 75 trains from on the Arkansas lines. Can that be possible? That is a lot of freight. Where does it all go?

ed

PS...Gabe what was the article you read on SP?

[Anonymous]

Sounds like the consensus to this point is NO !

[ericsp]

QUOTE: Originally posted by theNomad

I agree with espeefoamer completely, but with a slight change in terms. It's not a matter of better management, it's a matter of management that didn't want to have the road survive. I firmly believe that Southern Pacific's management was TRYING to kill it. Remember that there was a lot more to the S.P. than trains. Upper management wanted out of the transportation business so they could concentrate their efforts on more profitable ventures, like real estate. As to the new motive power purchased just before the end, I've always believed that a deal had already been made with the U.P. and that the new power was simply a part of it. It was a deal sweetener. So the question remains: Could the S.P. have survived without the U.P.? Sure, if it had wanted to. Would it have? No. Not without management comitted to saving it. --JD Nomad

Did SP retain the real estate business after the SPSF? I know they lost the pipeline business to Santa Fe Pacific. When did Sprint split off?

[Anonymous]

An interesting sidenote on SP management, I do know that a former SP manager was one of the forward-thinking (or needlessly risk taking, depending on your point of view) types in the early 1990's who was a proponent of experimenting with the open access concept for SP. Of course, he didn't last too long after making his pitch. The unaswerable question then is this: Was SP management wise and judicious in getting rid of this guy, or was there firing of him an omen of their derelict management philosophy?

[broncoman]

So it could have been the demise of Santa Fe, but why was the merger between SP blocked but the one with Burlington Northern was allowed. Different political climates?

[Anonymous]

Let's go back to the beginning here. A lot of good points have been made here, and a lot of good questions asked. I don't pretend to be the world's greatest expert on this, but I'll tell you where my information comes from. Back in the 1970's my father belonged to a rather famous fly fishing club. I won't mention the name of it because it's still in existence today, and besides, it doesn't matter anyway. I was invited to be a guest of my father's many times at this club, and because of that, I got to know many of the members. One of those members was Ben Biaggini, the president of the Southern Pacific at that time. As a Southern Pacific employee I had some things in common with him, on top of the fact that he and my father had become friends over the years because of both business relationships and their common interest in fishing. ( To explain: my father had been one of the S.P.'s lawyers for a time.) Obviously, as a relatively young engineer, I was somewhat in awe of Mr. Biaggini, so tended to keep my distance from him. I suppose I was afraid of irritating him somehow, and thus screwing up my future. Anyway, to make a long story short, one day it happened that he and I came in off the river a bit ahead of everyone else, and a conversation ensued between the two of us. After general pleasantries, Mr. Biaggini got down to business. He asked me a number of questions about how I liked my job, how I liked my supervisors, what I thought about the railroad generally, and so forth. I'm afraid I wasn't much of a conversationalist, but he seemed to understand that he was putting me on the spot. After a few minutes of his questions and my one word answers, he offered me some advice. This isn't an exact quote, but it's pretty close. He said to me, "You seem like a pretty good kid, so I'm going to tell you something. Go find yourself something else to do. This railroad isn't going to be around in a few more years, and you'd be better off to get out now and find another career." At this point I probably said something really stupid like "What the #%*& are you talking about", but I honestly don't remember. Whatever I said, he must have been OK with, because he proceeded to fill me in, in general terms, on just what "Corporate's" plans were. The big deals were real estate, Sprint, pipelines and several others. The transportation business wasn't lucrative enough anymore and they were determined to be rid of it. Well, I was speechless. My shock must have been obvious, because he said something on the order of "Don't worry, it's not going to happen tomorrow. You've got a couple of years yet." Oh, wonderful, I thought. I've got the only job I ever really wanted, and you're telling me it's going to vanish into thin air in a couple of years! I've never forgotten this because at the time, it seemed like my safe little world was crumbling around me. I had a young family to support, and in truth the prospect of having to start over scared the crap out of me. Well, live and learn. I never did go looking for another job, mainly because I couldn't think of anything else I'd rather do. It was just as well, as I managed to hang on with the S.P. right to the bitter end and am now working for the Union Pacific. It wasn't my world that crumbled, but "Corporate's" big plans. As jcavinato accurately pointed out, securities analysts recognized that the Southern Pacific was being brought down from within, and if you look at the progression of events leading up to the U.P. buyout, it's now relatively easy to see that the handwriting was on the wall. MP173 says that as he understands it, the S.P. got hammered by deregulation. I agree. I've never said that it would have been easy to keep the S.P. alive, but I am saying that no effort was made to do so. Every time something came down the pike that bit them in the backside, they lay down and took it with no more than token resistance. Again, the point is that the effort was never made. As to the question about S.P.'s real estate business, I can only answer from memory, which may be faulty. If my recollection is correct, they did indeed retain that aspect of the business after the SPSF fiasco. In fact, if memory serves, the Southern Pacific was, at one time, the biggest landowner in the state of California outside of the government. If anyone has better information on that particular subject, please jump in. Lastly, Dave (futuremodal) asks the question "was S.P. management wise and judicious.......etc." and broncoman asks why the S.P./ Santa Fe merger was disallowed and the Burlington Northern / Santa Fe was allowed. To the first, well, I'll leave that one to your judgement. To the second I can only say this: Who the heck understands politics anyway? Different political climates sounds like a good guess to me, and besides, to dig any deeper into it than that risks starting a whole new thread that'll go on forever. --JD Nomad

[Puckdropper]

theNomad,

That was an interesting story. I enjoy reading posts from the many people here who are/were "on the inside." Could you do one thing to make it easier to read, though? Seperate your paragraphs (press enter twice) so there's not a screenful of text. Thanks.

[MP173]

Mr. Nomad:

Thank you very much for that story.

That must have been one interesting conversation. I applaud Mr. Biaggini for being forthright with you on the matter.

Interesting how you stuck with your decision and it turned out ok. We all face critical times in our lives when we must make such decisions.

What would you fly fish for? Trout?

ed

[Anonymous]

As far as I know of,Yes the SP could have. There is a lot of Business out there,The Railroads just don't want it.

[espeefoamer]

After the SPSF merger was disalowed SP was stripped of everything but the railroad.I don't know what outside assets D&RGW had when they bought the SP.What did the Rio Grande have in the way of real estate or other assets?

[Anonymous]

Mark-

FOFLMAO....

get up and...

FBOFLMAO.... [B=Back]

I would only change one thing

The topic "Are People Crazy? would be replaced with "What, are you People Crazy?" [Brooklyn accent optional]

LC

[greyhounds]

A good book that fills in a lot of the "blanks" regarding SP is "The Southern Pacific, 1901-1985" by Don L. Hofsommer.

The thing that struck me most from the book was the "heroic manger" style of management. That's kind of where the guy at the top is "heroic" and the corporatiion lives and dies with his decisions. (and no one else dare make a real decision.)

Case in point, the SP began to replace its dining cars with simpler meal service at lower cost. This better fit the budgets of the people on the trains, but it caused a lot of ill will among "traditionalist" who saw it as a downgrading of passenger service.

They only did this after the President of the railroad saw people getting off one of his trains and running into a hamburger joint to eat instead of using the dining car. The food cost too much in the diner and they just wanted a hamburger.

But it didn't happen until the Prez himself saw for himself. You can't do things that way. Business changes too fast. You have got to have good people in charge who you don't make afraid to make changes. SP didn't do that. It was top down to the end - and that meant the end came.

[Anonymous]

To all-- I'm always amazed how much I can learn from these forums. As Mark Hemphill correctly points out, this one contains more than the usual amount of conjecture and opinion, mine certainly included, but even so there are some gems contained in it. Sometimes the other guy's opinion is enough to start my mind off in it's own direction, powered by curiousity and eventually leading to knowledge.

More to the point of the thread, Mark makes another statement that I think we should all pay attention to: "The people in a position to make the decision to merge UP and SP all thought they were making the correct decision". That seems pretty obvious, but none of the rest of us brought it up did we? I restate it for emphasis, because it made me consider the whole thing from a slightly different perspective. Thanks, Mark. I would only add that for me, the speculative nature of a thread like this is part of the fun.

Since I'm determined to keep it relatively short for once, just a couple of things more: Puckdropper, good advice is always appreciated. You'll notice I took it. I hadn't thought of it as a readability issue until now.

MP173, both your comments and Puckdropper's led me to think that maybe I should clarify a couple of things. I'm not complaining, mind you. You guys out there keep me on my toes, and that's a good thing. What I'd like everyone to remember is this: I'm not any kind of "insider" in the railroad world. Oh, I've been lucky enough to be in the right place at the right time now and again, like when I had the conversation with Ben Biaggini, but other than that I'm just another grunt. The only thing I get to be inside is the cab. To tell you the truth, though, I wouldn't have it any other way.

Oh, yeah, by the way MP173, you're right. We were fishing for trout.

JD Nomad

[MP173]

Nomad:

I guess it depends on your definition of "insider". A person employed by a company, in any capacity, is subject to all sorts of information that a regular guy like me is never privy to.

Your story about the fly fishing is just an incredible story to me. It would have been interesting to know if Mr Biaggni was influencing that decision or whether he was following orders.

Did you catch any trout that day?

I have never fly fished, but I watched A River Runs Thru It. Personally, give me ultralight tackle and a lake or pond of crappie or bluegills and I a very happy man. Particularly if I have a sharp filleting knife and an iron skillet.

What line do you run? Over Tehachipi or any of the mountain grades?

ed

[Anonymous]

Nomad, regarding Mr. Biaggini's statement to you that you should have begun looking for another job since SP the railroad was not going to be around in a few years, for him to have stated it that way e.g. "look for another job" rather than "you might be working for new management" leads one to perceive a major retrenchment or shutdown was in order as being in the best wishes of SP the company, merger or no merger. So I must ask anyone who might know, how many SP train crewmen were laid off or took early retirement upon UP's takeover? Also, given UP's underestimate of how many crewmembers would be needed of late leads me to beleive that UP management perceived a major slowdown in the railroading industry was in the cards, and as such "advised" the SP upper echelons including Biaggini that such workforce reductions were imminent.

Was rail management of the 1990's so out of it that they couldn't make reasonable predictions of the increase in world trade and the subsequent increase in intermodal transportation needs? Didn't they read the same business newspapers and magazines the rest of us perused which were immersed in information regarding the impending world trade dynamics?

One interesting logistic does come to mind. Of the western railroads in the U.S. during the 1980's and 1990's, it was the two PRB companies who became the sole survivors into 2000. Could it be that having access to the low cost, low sulfer coal of the Powder River Basin was seen as THE lifeblood of western railroading into the 21st century, with all other potential commodities including other coal producing regions not having the necessary value or volume to enhance a profitable rail operation?

[MP173]

DAve:

I dont have a clue as to what the revenue was/is for PRB coal. But, based on comments I now read, it seems as if the margins are pretty thin now.

So, that means that the early days of PRB coal were the days to make $$$ and to strengthen your franchise, similar to most businesses.

Any comments out there regarding the desirability of PRB coal today vs 1980?

ed

[Anonymous]

QUOTE: Originally posted by cnwfan11

QUOTE: Originally posted by Randy Stahl

I think as a class 2 regional it could have done fine.
Randy

[#ditto] SP was doing just fine till UP [:(!][V] stuck their grubby hands in the situation. Look at what has been happening in Texas,especially in the Gulf Coast area,and the chemical companies that are there.

SP was much better to work for before UP took over. Thats from the Mechanical side of things.....[:D]

[Anonymous]

Ed-- Point taken about the definition of insider, but I have to tell you that the info that filters down to the troops is usually not the straight scoop. Rumor has a bad habit of changing slightly with every retelling and rumor is usually all we get. For myself, I'd define an insider as someone who has feelers in the home office, or maybe someone with a friend on the board of directors.

As to Biaggini's influence over the goings on of that time, anything I say is pure guesswork. Obviously, even he was guessing up to a point, because despite his seeming prediction of SP's demise I managed to stay employed. Hindsight being 20-20, I honestly think the whole conversation had more to do with the fact that he was a friend of my father's than anything else. He probably didn't want to be in the position of not having said anything. ( You'd have to know my dad, then this would make perfect sense.) I think what he expected was that there would be no room for someone with my seniority in the near future, and he was almost right. During those years I moved several times, and even at that I frequently found myself at the bottom of the extra board. My wife always refers to that time as "the days of hot dogs and beans".

This is off topic, but I've got to hit on it anyway just briefly. The only point to the fly fishing in terms of this story is to explain how I managed to be in close contact with someone like Ben Biaggini. Having said that, I have to tell all the fishermen out there that, yes, I do love to fish. Whether it's fly fishing, spin casting, bait casting..............

Last but not least, Beatnik jumps in with a comment about the difference between working for SP and UP. He's right on the money as far as most former SP and WP people are concerned. I'm sure there are a few that like the UP better, but quite frankly, I've never met one. For myself, I have to admit that I was pretty unhappy when UP first took over, but as I've said before, I've gotten used to their ways. More to the point, though, is Dave's question about crew layoffs and retirements at that time. I can really only answer based on what I observed myself, but yes, both those things occurred. They couldn't cut too deeply in places where they'd formerly had no presence, but I've been told that in others the axe fell pretty hard. As to actual numbers, I could only guess. I do remember a number of people who got out within a year or less because they were miserable under UP management, and others that have gone since, as soon as they were able, for the same reason. Please remember that I saw this from an operating point of view, and that people from other crafts may have a different take on it. I think we've already gotten the mechanical department's view, but I wonder what others think?

One last thing that I've always found interesting: As UP and SP crews were integrated, there was a feeling on the part of some of the old UP hands that the SP guys were a bunch of spoiled whiners. I don't really know if that was a localized thing or not. Any old UP guys care to comment? From my own observation, I'd have to say there's at least SOME truth in it.

--JD

P.S. Ed, I don't remember if I caught any fi***hat day, but in those years the fishing was usually pretty good at that location. As to where I run, let's just say that these days I'm mostly a flatlander. I'd rather not be any more specific than that so that I'm free to comment on my employer anonymously. ( OK, OK, I know that makes me a little paranoid......)