Sorry, but now that I have renewed my posting for two days, I have to ask a question that I am sure will have a readily apparent answer to most readers who are far more knowledgeable than I when it comes to rail matters. But, what changes hit the rail industry from the 1960s to the 1970s to make things go so horribly wrong?
Granted my pool of knowledge is small, but my knowledge of the Illinois Central, Nickle Platte, Southern Pacific, and a few other railroads indicate that--although I would not describe the 1960s as a boom of rail traffic--rail lines seemed healthy and sustainable. But, by the 1970s, it looked like every rail line was heading for a two mile run off a one mile pier.
The criticism of pre-Staggers rail regulation seems fairly justified to me. Yet, this regulation was with the industry well before 1960; yet it wasn't killing the industry in 1960. Why was pre-staggers regulation killing the industry in 1970?
Some may blame the interstate highway system. Yet, at worst, the interstate system strikes me as a two-edge sword, as it allows for increased business in areas that are served by both rail and the interstate.
Moreover, many mergers started during this time, which you would think would bring more health to the industry. Yet, things got horribly worse after these mergers, not better.
What happened at 12:00 on December 31, 1969 that caused such a decline in railroading? (realize that this statement is in jest, but I am interested in understanding why railroads could survive in the 1960s, but not the 1970s)
Gabe
The problems actually began in the 50's.Poor or non existant passenger train patronage because of auto sales,interstate highways,and airlines connected with the inability to discontinue money losing passenger services.Poor management decisions,a lazy ICC,mergers such as the 1967 Penn Central merger that didn't work because of opposing management teams,saddled with too many restrictions,debt and unwanted property and/or operations.Inability to meet shippers needs (ICC induced) or interchange between railroads to get shipments to receivers in a timely manner(managements of opposing railroads).
Have a good one.
Bill B
Remember too, that not all of the mergers were exchanges of stock, many involved cash as well. That money promptly left the industry.
Also don't view the 50's as a time of prosperity for everyone. Where I was born on the Mesabi Iron Range of Minnesota, 1954 was the last good year. By 1958, for many families, how well fed you were depended on how good a gardener and hunter you were, . Venison was on the menu two to three times per week in the winter and venison sausage in the summer. The arrival of the first freezers were a godsend. The bleakness of the outlook finally drove my parents to leave the area for better prospects elsewhere.
gabe wrote: Sorry, but now that I have renewed my posting for two days, I have to ask a question that I am sure will have a readily apparent answer to most readers who are far more knowledgeable than I when it comes to rail matters. But, what changes hit the rail industry from the 1960s to the 1970s to make things go so horribly wrong? Granted my pool of knowledge is small, but my knowledge of the Illinois Central, Nickle Platte, Southern Pacific, and a few other railroads indicate that--although I would not describe the 1960s as a boom of rail traffic--rail lines seemed healthy and sustainable. But, by the 1970s, it looked like every rail line was heading for a two mile run off a one mile pier.
However because railroad physical plant has a very long lifetime, the railroad industry was able to persist for nearly 50 years, slowly cannibalizing itself. By 1970 there was nothing left to cannibalize; many roads were finished. The 1906 date is very sharply scribed in railroad history. After that date railroad expansion and heavy reconstruction nosedived. (This is old hat, my friend. A.C. Kalmbach and D.P. Morgan co-authored the article “The Golden Age of Railroad Construction”: in the February 1949 issue of Trains that described and analyzed this watershed quite sufficiently. Well, at least I thought they had!)
Consider meat processing, which was formerly concentrated in large cities or in terminal markets, which the truck enabled to scatter into the cattle-growing regions. According to Kansas Board of Agriculture statistics, the percentage of cattle fed in large Kansas feedlots (1,000 head capacity or more) went from 26.7% in 1960 to 87.6% in 1975. The number of large-capacity feedlots grew from seven in 1952 to 140 by 1974, and grain-fed cattle increased from less than half a million in 1955 to around two million by the 1970s. This was matched by equal growth in red meat packed in Kansas (which historically had not been a major packing state).
Saunders “Merging Lines” does the best job to date describing why mergers didn’t work. What I don’t think you’re acknowledging is that mergers were the only trick left to play; railroads had no other options open to them – not even just quitting business.
What happened at 12:00 on December 31, 1969 that caused such a decline in railroading? (realize that this statement is in jest, but I am interested in understanding why railroads could survive in the 1960s, but not the 1970s) Gabe
S. Hadid
Mr Hadid-
The Hepburn Act came in during 1906. Without it, would the turning point have happened later ?
1435mm wrote: gabe wrote: Sorry, but now that I have renewed my posting for two days, I have to ask a question that I am sure will have a readily apparent answer to most readers who are far more knowledgeable than I when it comes to rail matters. But, what changes hit the rail industry from the 1960s to the 1970s to make things go so horribly wrong? Granted my pool of knowledge is small, but my knowledge of the Illinois Central, Nickle Platte, Southern Pacific, and a few other railroads indicate that--although I would not describe the 1960s as a boom of rail traffic--rail lines seemed healthy and sustainable. But, by the 1970s, it looked like every rail line was heading for a two mile run off a one mile pier. Your premise is truly 66 years out of date. It really should be, "What happened to railroads after 1906?" What you think only happened in the 1970s was merely the end-game of the rapid erosion of pricing power and market share caused by the appearance of inexpensive autos and trucks in the the early 1900s coupled with the decision of the public that highways should be publically financed and toll-free, coupled with a refusal by the same public to allow railroads to abandon unprofitable business lines. However because railroad physical plant has a very long lifetime, the railroad industry was able to persist for nearly 50 years, slowly cannibalizing itself. By 1970 there was nothing left to cannibalize; many roads were finished. The 1906 date is very sharply scribed in railroad history. After that date railroad expansion and heavy reconstruction nosedived. (This is old hat, my friend. A.C. Kalmbach and D.P. Morgan co-authored the article “The Golden Age of Railroad Construction”: in the February 1949 issue of Trains that described and analyzed this watershed quite sufficiently. Well, at least I thought they had!) The criticism of pre-Staggers rail regulation seems fairly justified to me. Yet, this regulation was with the industry well before 1960; yet it wasn't killing the industry in 1960. Why was pre-staggers regulation killing the industry in 1970? Oh yes it was! It just took 50 years for the effects to reach the bitter end, again, because railroads had an immense legacy investment. You are imagining that cause goes to effect quickly, whereas when you’re dealing with something that lasts as long as railroad investment the pig passes through the python slowly. Review the annual reports in the 1945-1955 era of railroads that did not inhabit growth areas, such as the grangers and Official Territory roads, and see how their results after 1952 show their cash position steadily march from positive to zero to negative. Some may blame the interstate highway system. Yet, at worst, the interstate system strikes me as a two-edge sword, as it allows for increased business in areas that are served by both rail and the interstate. What the highway system (of all types, not just the Interstate) permitted was a dissemination and decentralization of manufacturing and distribution of all types, which enabled large amounts of freight to move in short hauls from producer to manufacturer to distributor to consumer and never need to pay the price of consolidation to gain the large-volume, long-distance capability of railroads. That stranded immense swaths of railroad infrastructure which could no longer pay their way. Consider meat processing, which was formerly concentrated in large cities or in terminal markets, which the truck enabled to scatter into the cattle-growing regions. According to Kansas Board of Agriculture statistics, the percentage of cattle fed in large Kansas feedlots (1,000 head capacity or more) went from 26.7% in 1960 to 87.6% in 1975. The number of large-capacity feedlots grew from seven in 1952 to 140 by 1974, and grain-fed cattle increased from less than half a million in 1955 to around two million by the 1970s. This was matched by equal growth in red meat packed in Kansas (which historically had not been a major packing state). Moreover, many mergers started during this time, which you would think would bring more health to the industry. Yet, things got horribly worse after these mergers, not better. Saunders “Merging Lines” does the best job to date describing why mergers didn’t work. What I don’t think you’re acknowledging is that mergers were the only trick left to play; railroads had no other options open to them – not even just quitting business. What happened at 12:00 on December 31, 1969 that caused such a decline in railroading? (realize that this statement is in jest, but I am interested in understanding why railroads could survive in the 1960s, but not the 1970s) Gabe Quite simply it took that long to run out of assets. S. Hadid
There seems to be a contradiction between your hypothesis of decentralization (brought about by improved highways) and your example of the Kansas feedlot growth. If meat packing grew in Kansas at the expense of the big city meat packing industry, that would suggest an increase in long haul freight prospects, not the opposite.
Oh, it's a good example, but not as you framed it. And it typified the lost opportunities for railroads as time sensitivity became a more pronounced characteristic of intercity freight.
If anything, the advent of viable intercity highway travel made possible the economic growth machine that should have played right into the rail industry's hands. Freeways and airlines aided in shifting passenger transportation away from railroads, thus a big money loser was erradicated. It was all set up for a more optimized freight rail system.
So what happened?
In one word - speed, or more precisely the lack thereof in terms of theoretical rail speeds. Freight movement on highways has always been limited to the 60 - 70 mph max range both for practicality and safety reasons. Meanwhile, back in the 1930's railroads were approaching 100 mph speeds as a practical max norm, and one would presume a continued evolution of speed into the triple digit range as an average norm. At this same time top road speeds were still down in the under 50 mph range even with blacktop.
Instead, the railroads began slipping back into a comfort zone of 25 mph average speeds for longer and heavier consists. Once that happened it was all but over for railroads, since now their main items of haulage were mostly non time sensitive bulk goods. They lost the value-added component of time sensitive cargo, settling for the low margin stuff.
Remember John Kneiling's banana trade example? Same thing - it all went to trucks by default as railroad
Dale: Yes, it was the beginning of the end, along with the Panic of 1906-07.
(The Wikipedia article linked above is not inaccurate but it is very incomplete. A much better description is pages 52-59, "A History of the ICC, From Panacea to Palliative," Ari and Olive Hoogenboom, W.W. Norton & Company, 1976)
In brief, the Hepburn Act gave the ICC big teeth. It enjoined railroads to comply with its orders or sue in court, greatly enlarged the scope of its regulation into allied transportation businesses such as express and sleeping car companies and oil pipelines, and empowered the ICC to greatly enlarge its staff. The Hepburn Act also prohibited railroads from hauling, except for their own use and excepting lumber, any product of their own production or manufacture, such as coal. This was a focused attack on the anthracite roads which were actually arms of coal mining companies that used high railroad rates to drive from the field competing mining companies, in essence selling their coal at a loss and making their profit from the railroad.
The effects were large and swift. Rail rates were effectively frozen at 1906 levels, which were only slightly higher than the artificially low rates of 1899. Net investment plummeted from $1.5 billion in 1906 to $100 million in 1912. 1910 earnings failed to equal 1907 earnings, even though gross ton-miles had increased 10%. The operating ratio for the industry climbed from 66 in 1910 to 72.2 in 1914.
In 1910 the Supreme Court upheld rate reductions the ICC had imposed on the Rock Island and Burlington, in effect proving the validity of the Hepburn Act. Railroad stock prices collapsed.
In 1913 the Newlands Act gave the ICC enforcement over railroad labor relations originally contemplated under the Erdman Act of 1898, and thus began a pattern of squeezing the industry between higher costs and lower revenues.
As a parenthetical comment, I'm not a fan of Albro Martin and his screeds, and I take no side in this battle.
1435mm wrote: Your premise is truly 66 years out of date. It really should be, "What happened to railroads after 1906?" ....The 1906 date is very sharply scribed in railroad history. After that date railroad expansion and heavy reconstruction nosedived. (This is old hat, my friend. A.C. Kalmbach and D.P. Morgan co-authored the article “The Golden Age of Railroad Construction”: in the February 1949 issue of Trains that described and analyzed this watershed quite sufficiently. Well, at least I thought they had!)
Your premise is truly 66 years out of date. It really should be, "What happened to railroads after 1906?" ....The 1906 date is very sharply scribed in railroad history. After that date railroad expansion and heavy reconstruction nosedived. (This is old hat, my friend. A.C. Kalmbach and D.P. Morgan co-authored the article “The Golden Age of Railroad Construction”: in the February 1949 issue of Trains that described and analyzed this watershed quite sufficiently. Well, at least I thought they had!)
A review of relevant peer railroads, NP, MILW, GN, CBQ and CNW shows that by 1925, the average investment in property was 72% greater than that of 1906 as the result of heavy rebuilding programs and, in the case of MILW, extension. The North Western for instance, increased its physical plant investment 1906 to 1923 from $276 million to $489 million, an increase of 77%.
This enormous increase in investment occured notwithstanding the 1907 Depression -- considered one of the worst in American history -- and the collapse of the European Bond Market, the historical source of American railroad construction capital, during the leadup to WWI -- a bond market that did not recover. And the 1914 opening of the Panama Canal.
Too, consider that the largest percentage historically of railway mileage in receivership was during the period 1893-1903 as a result of the 1893 Depression which took out most of the transcontinentals as well as many more established companies. Miraculously, this occured without the heavy hand of ICC intervention through the Hepburn Act.
By the standards of actual collapse and bankruptcy, the rail industry was in worse shape 1893-1900 than 1970-1977 -- that is, during some "Golden Age."
futuremodal wrote:There seems to be a contradiction between your hypothesis of decentralization (brought about by improved highways) and your example of the Kansas feedlot growth. If meat packing grew in Kansas at the expense of the big city meat packing industry, that would suggest an increase in long haul freight prospects, not the opposite.Oh, it's a good example, but not as you framed it. And it typified the lost opportunities for railroads as time sensitivity became a more pronounced characteristic of intercity freight.
What's left out here is that the ICC regulators effectively prohibited the railroads from competing for the business from the new meat production facilities.
A trucker could sign a contract with a producer that guranteed a certain level of business provided the trucker met certain price and service coditions. A railroad couldn't legally do that. To compete the railroad would have to invest megabucks in specialized refrigerated equipment, put on the expidited, expensive service, and just hope the traffic would really materialize. (as, of course, the shipper promised it would. A promise kept untill it was in the shipper's best interest to forget the promise.) A trucker would have the traffic guarntee in a signed contract before he went to the bank for money to buy the equipment. Again, the railroad couldn't legally do that.
And when the railroads went ahead and tried, betting "on the come", and they did do that, and when a contract trucker responded by cutting the rate, the railroads couldn't match it without the regulators' blessing. Their rate actions could be challenged by the truckers and things would drag on before the ICC while the expensive equipment sat idle.
Classic example. IBP, one of the "new breed" meat processors located near the cattle raising areas had its own contract carrier truck line; "Processed Beef Express". The IC actually got PBX to put its trailers on flatcars out of Sioux City. So far, so good.
But NO! said the ICC. You see PBX was a "contract" carrier and the IC was a "common" carrier. The two simply could not mix. It's dumber than Hell, but that was regulation for you. The meat went back to highway movement. As I said, the regulators prohibited the railroads from competing for the new meat business. No rail contracts were allowed and the railroads couldn't haul the contract truckers' trailers. It don't get no dumber.
And it bothers me to this day. Meat production isn't really decentralized. In fact, it's very centralized. People eat more chicken than beef these days and Tyson supplies its share to the entire California population from one distribution center in Russelville, Arkansas. This WB move would produce an empty refrigerated trailer in California. That's an opportunity, not a problem. But once the business gets forced off the rails by government interferance, it's Hell to get back.
I could go on, but there's some cirtters on the roof and some fat guy is trying to get down the chimney. Got to go. This could be trouble.
I am not an economist, nor am I consider myself a railroad historian, but as I have read there were a number of factors which lead to the great meltdown in the 70's:
1. Too much ROW due to build ups in earlier eras.
2. Movement of freight from the rail systems to much more efficient truck transportation.
3. Loss of revenue in passenger service.
4. Inability to rapidly discontinue the passenger service. The end of the mail contracts was th
e final bullet.
5. Full crews which gained significant wage increases during the 60's/70's which were not recovered in the rate making process.
6. Inability to reduce fixed costs, which coupled with a rising variable cost factor and flat revenue led to squeezed margins.
7. Inflationary era of the 70's.
8. Migration of manufacturing from the Northeast to other regions. This led to a rapidly reduced Northeastern rail system (NYC and PRR plus many others). Once the dominos began falling, others fell.
9. Paradoxically, even tho railroads could not easily abandon assets (light density lines), they could not maintain the heavily used lines, thus leading to slow orders and reduced service.
It was an ugly time for railroading. I became "aware" of railroading in 1972 with the purchase of the May issue of Trains Magazine. I watched the industry reach rock bottom, never witnessing it at full or even partial strength until the revolution began in the 80's.
ed
gabe wrote:What happened at 12:00 on December 31, 1969 that caused such a decline in railroading? (realize that this statement is in jest, but I am interested in understanding why railroads could survive in the 1960s, but not the 1970s)Gabe
MP173 wrote: I am not an economist, nor am I consider myself a railroad historian, but as I have read there were a number of factors which lead to the great meltdown in the 70's:
Okay, I'll bite!
Yes, and no. Too many branchlines in granger country, yes. But to say that there was too much mainline capacity flies in the face of normal economic growth, which on average has consistently risen during the same time that railroads were retrenching. The business was there, but for whatever reason the railroads didn't grow with it. Blame it on the ICC, blame it on the integrated model, blame it on the Panama Canal, whatever.
Fuel efficiency of OTR trucks - 60 ton/miles per gallon.
Fuel efficiency of carload rail - 200 ton/miles per gallon*
Fuel efficiency of unit trains - up to 800 ton/miles per gallon
It is that carload vs OTR truckload where the efficiency arguement is pronounced. It is true that OTR trucks are more efficient in the short haul than carload due to dock to dock flexibility. It is also true that OTR trucks are more efficient than carload in the less than boxload catagory, regardless of length of haul. Beyond that, rails beat highways hands down due to the efficiencies of bulk movements, aka aggregation. And also note that normally OTR LTL trucks can and do move much more efficiently by rail where the service is provided.
And unit train efficiency beats OTR truckload hands down, even in the shorthaul lanes.
As I pointed out, the highways and airlines did the railroads a favor by taking up most of the passenger carrying duties. Even in the heyday of passenger rail, the concept did not make money for the most part, or only marginally so. The loss of dedicated passenger rail was a godsend to railroads, allowing them to focus on the more lucrative freight markets.
4. Inability to rapidly discontinue the passenger service. The end of the mail contracts was the final bullet.
Agreed. Once passengers went by road and air, there was no reason for the railroads to have to maintain the passenger fleets. Perhaps some entreprenuers somewhere saw a market potential for hauling passengers, but since the rail system was of the closed integrated type, those opportunities to serve the niche markets were lost as well.
The loss of the mail contracts was a direct result of faster air service. It is possible that higher rail speeds might have allowed the railroads to maintain some of the mail contracts, but not likely. However, it is interesting that when the US Post Office was ditching the railroads, companies like UPS were just starting out utilizing railroads from some of their package delivery. The private sector saw the opportunity of moving parcels by rail while the government sector didn't. Ironic.
Agreed.
?? Can you clarify?
7. Inflationary era of the 70's.8. Migration of manufacturing from the Northeast to other regions. This led to a rapidly reduced Northeastern rail system (NYC and PRR plus many others). Once the dominos began falling, others fell.
There is a correlation between your #5 and your #8. The unions miscalculated the ability of capital to migrate to lower labor cost areas in both instances.
9. Paradoxically, even tho railroads could not easily abandon assets (light density lines), they could not maintain the heavily used lines, thus leading to slow orders and reduced service. It was an ugly time for railroading. I became "aware" of railroading in 1972 with the purchase of the May issue of Trains Magazine. I watched the industry reach rock bottom, never witnessing it at full or even partial strength until the revolution began in the 80's.
Remember that this was also the advent of heavier axle loads, you know, to make the railroads *more efficient*. It is interesting how the introduction of the HAL's corresponded with the increased degradation of the tracks.
Objectively, the "70's" happened to the railroads, just like it happened to everybody else.
High capital industries got clobbered -- legacy physical plants? Change in business climate? Inflation? Unions? Wage and price controls? Soaring taxes? "Japan, Inc."? Skyrocketing fuel costs? Yes, yes, yes, yes, yes, yes, yes, and yes.
Given that list, what would you honestly expect?
GM and Ford suffered huge losses. LTV Steel. International Harvester. The Anaconda Company. Chrysler and Lockheed had to be "bailed out." The list of failures and near failures is lengthy for that decade.
Mysteriously, none of them blamed the Hepburn Act of 1906.
Ironically, the industry that survived those particular circumstances the most intact was the electric power industry -- the most highly regulated of them all.
MichaelSol wrote: Mysteriously, none of them blamed the Hepburn Act of 1906.
Michael-
Would you say the Hepburn Act had little or no effect on the Chicago, Milwaukee and St. Paul ?
If it had come into effect during 1904, do you believe the Directors would have gone ahead with the PCE ?
futuremodal wrote: Fuel efficiency of OTR trucks - 60 ton/miles per gallon.Fuel efficiency of carload rail - 200 ton/miles per gallon*Fuel efficiency of unit trains - up to 800 ton/miles per gallonIt is that carload vs OTR truckload where the efficiency arguement is pronounced. It is true that OTR trucks are more efficient in the short haul than carload due to dock to dock flexibility. It is also true that OTR trucks are more efficient than carload in the less than boxload catagory, regardless of length of haul. Beyond that, rails beat highways hands down due to the efficiencies of bulk movements, aka aggregation. And also note that normally OTR LTL trucks can and do move much more efficiently by rail where the service is provided.And unit train efficiency beats OTR truckload hands down, even in the shorthaul lanes.
Dave-
What about interchange and differences in mileage ?
If you were shipping lentils from Moscow to Pocatello, a truck could go straight south down to Boise, and the east on I84/I86. By train the PCC would have to go west to the UP interchange, then UP would classify the cars at Hinkle, before they headed east. Even with open access, could rail compete ?
MichaelSol wrote: 1435mm wrote: Your premise is truly 66 years out of date. It really should be, "What happened to railroads after 1906?" ....The 1906 date is very sharply scribed in railroad history. After that date railroad expansion and heavy reconstruction nosedived. (This is old hat, my friend. A.C. Kalmbach and D.P. Morgan co-authored the article “The Golden Age of Railroad Construction”: in the February 1949 issue of Trains that described and analyzed this watershed quite sufficiently. Well, at least I thought they had!) A review of relevant peer railroads, NP, MILW, GN, CBQ and CNW shows that by 1925, the average investment in property was 72% greater than that of 1906 as the result of heavy rebuilding programs and, in the case of MILW, extension. The North Western for instance, increased its physical plant investment 1906 to 1923 from $276 million to $489 million, an increase of 77%.This enormous increase in investment occured notwithstanding the 1907 Depression -- considered one of the worst in American history -- and the collapse of the European Bond Market, the historical source of American railroad construction capital, during the leadup to WWI -- a bond market that did not recover. And the 1914 opening of the Panama Canal. Too, consider that the largest percentage historically of railway mileage in receivership was during the period 1893-1903 as a result of the 1893 Depression which took out most of the transcontinentals as well as many more established companies. Miraculously, this occured without the heavy hand of ICC intervention through the Hepburn Act.By the standards of actual collapse and bankruptcy, the rail industry was in worse shape 1893-1900 than 1970-1977 -- that is, during some "Golden Age."
MichaelSol wrote: Objectively, the "70's" happened to the railroads, just like it happened to everybody else. High capital industries got clobbered -- legacy physical plants? Change in business climate? Inflation? Unions? Wage and price controls? Soaring taxes? "Japan, Inc."? Skyrocketing fuel costs? Yes, yes, yes, yes, yes, yes, yes, and yes.Given that list, what would you honestly expect?GM and Ford suffered huge losses. LTV Steel. International Harvester. The Anaconda Company. Chrysler and Lockheed had to be "bailed out." The list of failures and near failures is lengthy for that decade. Mysteriously, none of them blamed the Hepburn Act of 1906.Ironically, the industry that survived those particular circumstances the most intact was the electric power industry -- the most highly regulated of them all.
I admit, I am over my head here in my knowledge of this subject--hense my reason for asking. I could give some pedantic rambling as to my view of causation, but it just does not compare to the more learned view of others that have already been posted, such as Mssrs. Hadid and Mosser.
And, to my discredit, though a coxcomb, Mr. Sol knows more far about the rail industry than I--although some of his polemic but droll uses of law lead me to believe his knowledge of the rail industry is less than what is reflected in his above-stated bombastic ranting.
But, I mean really, despite my inferior knowledge of the industry, I can spot when someone is hopelessly over his head.
Even assuming Mr. Sol's premise is accurate--that no one mentioned the Hepburn Act during the 1970s--I can name four American "panics," to say nothing of a depression, that would meet or exceed the economic downturn of the 70s. Yet, the rail industry did not experience the collapse it faced during the 70s. Assuming no one blamed the Hepburn Act, the absence of such during the 70s downtrun is more likely attributable to myopia on the part of the industry as it is the absence of causation.
However, as to Mr. Sol's premise that no one was blaming the Hepburn Act, when Staggers was proposed--during the 70s no less--I would be willing to bet any amount of money that there was more than one reference to the Hepburn Act in the Congressional sessions that led to the signing of Staggers. So, as an initial matter, I suspect Mr. Sol's argument is flawed in its nascent stages.
My understanding of the Hepburn Act is the "tip of the iceberg". There were enough other things that went wrong, too, no doubt. The Hepburn Act slowed (pratically froze) rates in the middle of a time of huge capital investments. The growth of auto/truck traffic in the 1920's caused problems with short haul and/or high value traffic, the depression-followed by the traffic levels of WWII-then the expansion of air travel and long haul truck traffic picked up where the problems let off. Inflation (postwar and 1970's) in a capital intensive industry with inflated labor costs on top of it and the decline of manufacturing in the NE US (which became the epicenter of the troubles) all added to it. It wasn't so much that things went good in 60's to bad in the 70's as those were just the last two chapters of the sad saga: 1) Slowing the expansion [say, 1906-1929], 2) The contraction of short haul traffic but overall expansion of traffic making up for it [say, post WWI-1929], 3) The economic dislocations of the Depression and WWII [1930-1945], 4) The loss of long distance traffic [post WWII]. First the profits dropped, then there were various economies to try and stay ahead of the game, then the losses began...then the money ran out.
Vastly oversimplified, I know.
Michael -
To quote gabe
nanaimo73 wrote: futuremodal wrote: Fuel efficiency of OTR trucks - 60 ton/miles per gallon.Fuel efficiency of carload rail - 200 ton/miles per gallon*Fuel efficiency of unit trains - up to 800 ton/miles per gallonIt is that carload vs OTR truckload where the efficiency arguement is pronounced. It is true that OTR trucks are more efficient in the short haul than carload due to dock to dock flexibility. It is also true that OTR trucks are more efficient than carload in the less than boxload catagory, regardless of length of haul. Beyond that, rails beat highways hands down due to the efficiencies of bulk movements, aka aggregation. And also note that normally OTR LTL trucks can and do move much more efficiently by rail where the service is provided.And unit train efficiency beats OTR truckload hands down, even in the shorthaul lanes. Dave-What about interchange and differences in mileage ?If you were shipping lentils from Moscow to Pocatello, a truck could go straight south down to Boise, and the east on I84/I86. By train the PCC would have to go west to the UP interchange, then UP would classify the cars at Hinkle, before they headed east. Even with open access, could rail compete ?
You're not going to ship lentils to Pocatello from anywhere because no one there would know what a lentil is, but for the sake of discussion we'll let it pass.
A cargo load of lentils from Moscow to Pocatello by road will go east to Missoula (either via US 12 or north on US95 then east on I-90), continue east on I-90 to Butte, then south on I-15. Most truckers bound for SE Idaho from North Central Idaho tend to avoid US 95 through Riggins at all costs.
A cargo load of lentils from Moscow to Pocatello by rail will go west via the PCC to Hooper Junction and the UP Washy line, then via UP to Hinkle, where the car is reclassified, then on down to Pokey via the OSL. There are two lentil processors in Moscow, one on ex-UP and the other on ex-BNSF. If the latter wanted that move, they'd truck the load a few blocks to the nearest reload onto UP bound hoppers. BNSF would not provide a rate from Moscow to Silver Bow for interchange with UP.
Whether the load would go by truck or rail depends on the willingness of the railroads to provide the service. If they are of the affirmative, it'd go by rail.
bobwilcox wrote: MichaelSol wrote: 1435mm wrote: Your premise is truly 66 years out of date. It really should be, "What happened to railroads after 1906?" ....The 1906 date is very sharply scribed in railroad history. After that date railroad expansion and heavy reconstruction nosedived. (This is old hat, my friend. A.C. Kalmbach and D.P. Morgan co-authored the article “The Golden Age of Railroad Construction”: in the February 1949 issue of Trains that described and analyzed this watershed quite sufficiently. Well, at least I thought they had!) A review of relevant peer railroads, NP, MILW, GN, CBQ and CNW shows that by 1925, the average investment in property was 72% greater than that of 1906 as the result of heavy rebuilding programs and, in the case of MILW, extension. The North Western for instance, increased its physical plant investment 1906 to 1923 from $276 million to $489 million, an increase of 77%.This enormous increase in investment occured notwithstanding the 1907 Depression -- considered one of the worst in American history -- and the collapse of the European Bond Market, the historical source of American railroad construction capital, during the leadup to WWI -- a bond market that did not recover. And the 1914 opening of the Panama Canal. Too, consider that the largest percentage historically of railway mileage in receivership was during the period 1893-1903 as a result of the 1893 Depression which took out most of the transcontinentals as well as many more established companies. Miraculously, this occured without the heavy hand of ICC intervention through the Hepburn Act.By the standards of actual collapse and bankruptcy, the rail industry was in worse shape 1893-1900 than 1970-1977 -- that is, during some "Golden Age." Michael -To quote gabe "But, what changes hit the rail industry from the 1960s to the 1970s to make things go so horribly wrong?" Do you have an opinion you would like to share with the list?
"But, what changes hit the rail industry from the 1960s to the 1970s to make things go so horribly wrong?" Do you have an opinion you would like to share with the list?
I'll take an educated guess: 1960 - 1970 corresponded with heavier axle loads = more track damage.
Dave:I will respond to your comments to my posting...again, from a noneconomist and very casual railroad historian view.
My comment about being overbuilt which you agreed and disagreed on is based on the root of that 70's problem, the eastern roads and the granger roads. As I look at my Desk Map Systems "Railroads of the Continental United States", which I have referenced in previous threads, it is so obvious that east of the Colorado-Kansas line there was considerably more lines built than east of that line. And oh so many more abandoned. There just simply was too much track at that time for the traffic carried. Oh, one can make the piont that TODAY some of those rationalized lines could be utilized, but that is simply after the fact. During the 70's and earlier those lines were underutilized, for whatever reason.
I believe we have differing opinions regarding the "efficiencies" of trucks v rails. Sure, the cost of transporting via rail is considerably lower, but the efficiencies of trucking was (is) the flexibility it offered. LTL trucking ate into REA business, it was much more efficient and quicker. Truckload offered the ability to ship from door to door via a single carrier. Often railroad boxcar freight had to move thru several carriers...plus one had to fill a boxcar to get the rate. Trucking offered rate structures which rewarded the movement of partial truckloads or "header rates". Interchange between railroads was painfully slow, interlining between LTL carriers was much more efficient. LTL terminals "cross docked" freight in hours, rail terminals took much more time.
Passenger service ended in 1971 but the dedication of assets to that service in the 50's and 60's was a waste of money. How many depots were kept open in small towns to handle a handful of daily passengers? How many passenger cars were kept and maintained? How many ticket agents, porters, etc?
I believe that the railroads either had too many assets or those asset dollars were not deployed efficiently. Thus, when I comment about the inability to shed fixed assets such as the aforementioned passenger assets, low revenue branchlines, plus the equipment needed for the operation of those services, I am suggesting there was a very large percentage of assets which produced a very small amount of revenue. Those assets could not be disposed of during the 60's/70's and not until the wholesale abandonments began in the 80's were those finally jetisoned. One of the key measurements of a company is the return on capital. Railroad's returns have always been low, assets were very large and the margins very low.
So, as the inflationary pressures were mounting during the era and labor costs were rapidly escalating (read any good historical book on the era) and the ICC was holding back rate increases, the assets were horribly deployed. Could liquidation of certain assets helped? Dont know. I do know that Mr. Moyers of Illinois Central converted the double main to single main CTC by selling off the 136 pound rail to finance the CTC installation. Could that have happened 20 years earlier? No, lines could not be abandoned easily so the liquidation value could not been used to rebuild the mainlines that were sinking in the mud, or the communication/computer systems which were so woefully out of date.
What were the strong railroads of the 60's? Most people agree that there were a few:
1. MoPac may have been the strongest, yet it was very regional.
2. Southern (ditto).
3. Coal carriers NW and C&O
4. Transcon carriers such as UP and Santa Fe which were capable of "stretching out" and had a much longer haul.
The problem of the industry began in the east and made it's way west to the Missouri River and beyond. No one was isolated, they were all completely in bed with each other. UP depended on Rock Island and Penn Central to handle shipments. One stumbles and the system starts to fall apart.
Finally...I am not sure if the HAL's was the main factor in the deterioriation of the ROW's or simply along for the ride. Was it HAL's or the inability to maintain the track due to the deployment of assets in uncompensated endeavors such as branch lines with five member crews and 4 car trains?
It would be interesting to see what the assets were for Conrail at startup date and then 10 years later when Mr. Crane had it rolling. I dont have those numbers.
bobwilcox wrote:To quote gabe "But, what changes hit the rail industry from the 1960s to the 1970s to make things go so horribly wrong?" Do you have an opinion you would like to share with the list?
No changes hit the rail industry in 1960; rather, it was the status quo that hit the rail industry around 1960.
The following quote is from, A History of the ICC, Hoogenboom, pp. 159-160.
“[In December, 1960], John P. Doyle, staff director of the Transportation Study Group (created earlier by the Senate) submitted his draft report to the Senate Committee on Interstate and foreign Commerce. … Regulatory policy, the Doyle report concluded, ‘has produced a general program of preserving the status quo which is in direct opposition to the overall objective of a dynamic transportation system which can best serve the economy and defense of the country.’ Predicting that the nation was headed for a transportation crisis, the report cited … the absolute decline in railroad traffic and revenue from 1956 to 1959. Railroads suffered, the report continued, from the great technological developments in competing modes; from enormous public investment in highways, airports, and waterways at a time when railroads had difficulty raising private capital; … and common carriers were subject to ‘inequitable and destructive ICC regulation.’ ”
futuremodal wrote: As I pointed out, the highways and airlines did the railroads a favor by taking up most of the passenger carrying duties. Even in the heyday of passenger rail, the concept did not make money for the most part, or only marginally so. The loss of dedicated passenger rail was a godsend to railroads, allowing them to focus on the more lucrative freight markets.Agreed. Once passengers went by road and air, there was no reason for the railroads to have to maintain the passenger fleets. Perhaps some entreprenuers somewhere saw a market potential for hauling passengers, but since the rail system was of the closed integrated type, those opportunities to serve the niche markets were lost as well.The loss of the mail contracts was a direct result of faster air service. It is possible that higher rail speeds might have allowed the railroads to maintain some of the mail contracts, but not likely. However, it is interesting that when the US Post Office was ditching the railroads, companies like UPS were just starting out utilizing railroads from some of their package delivery. The private sector saw the opportunity of moving parcels by rail while the government sector didn't. Ironic.
Actually, passenger service was one of the big things that changed in the 60's.
Going in to that decade the industry's loss on passenger service was $485 million/year calculated on a fully allocated basis. That's a stagering number of 1960 dollars.But because it was a "fully allocated" number assigning fixed costs to specific business, the number was totally meaningless. Nobody paid any attention to it. Railroad executives and regulators alike both dealt with the direct cost of passenger trains when making decisiions. "In making decisions, railroad executives uterly ignored fully allocated costs." (Fred Frailey, "Twilight of the Great Trains", p 9. )
Instead, they based their decisions on direct costs, what could be saved by not running the passenger service. Overall, things were at about break even. Of course, some railroads had a passenger financial disaster on their hands, while others actually made a buck.
An internal study at the CB&Q produced a result that showed their intercity trains put $4.5 on the bottom line in 1964.
For the railroad industry as a whole, intercity passengers were just no big deal in the early 60's. Didn't make a lot, didn't loose a lot.
Then the Post Office diverted the mail from the passenger trains. First Class Mail pretty much went to air or truck movement. Parcel Post followed UPS and went into trailers. The USPS used high priority intermodal trains just like UPS. (There wasn't really a divergence in practice as Dave said. UPS just did it better.) "And when the mail was taken away in late 1967 and early 1968, the economics of passenger trains collapsed like a castle made of postcards." (Ibid. p 190)
Any other business could simply discontinue operations that drained their resources. But NO!. We had the ICC which could, and did, force the railroads to pour money down the passenger ratholes.
So that's one big thing that changed in the 60's.
bobwilcox wrote: Michael -To quote gabe "But, what changes hit the rail industry from the 1960s to the 1970s to make things go so horribly wrong?" Do you have an opinion you would like to share with the list?
Well the question, as I saw it phrased, was what went wrong during the 60s that caused the collapse during the 1970s?
Well, what went wrong with Big Steel? What went wrong with aircraft? What went wrong with big equipment manufacturers? What went wrong with Lockheed? With GM? With Chrysler?
If ignoring the elephant in the living room justifies Gabe's accusations of "pedantic" I suppose the Clinton administration offered the appropriate response for those who think it was the Hepburn Act of 1906: "it's the economy ...". He can have his insult contest. I don't need it. The facts have to speak for themselves.
The fact is that the number of miles of American railroads in receivership had always numbered in the many thousands ever since the Civil War, and in the years following the financial panic of 1893 the miles of line in receivership soared to nearly 40,000 miles, representing nearly 200 railroads.
How that managed to occur before the passage of the Hepburn Act is left a mystery.
But, how did that compare with the 1970s?
Railroads did, in fact, have their own special problem.
It wasn't the Hepburn Act of 1906.
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