N&W subsidiary Dereco

[tomjohn]

I don't know if this topic was previously discussed I remember reading in the BUFFALO EVENING NEWS now THE BUFFALO NEWS back in the mid 1970's I still have the article somewhere, N & W had a subsidiary called DERECO. What ever happened to DERECO? - it once controlled The Delaware and Hudson RR and The Erie Lackawanna RR...


Tom

[Matt Langworthy]

Dereco was created by the N&W in 1968. Erie Lackawanna had voiced serious concerns about the N&W/NKP/Wabash merger, the PC merger and the pending N&W/C&O merger (which never happened). Thus the ICC directed the N&W to bring a number of eastern RRs into its fold: EL, the D&H, the Reading, CNJ and B&M. All of them except the D&H were struggling. In fact, the CNJ was already bankrupt. Thus the N&W created a holding company to purchase them. The name Dereco was based on the acronym of several of these RRs, although Dereco ultimately acquired just the EL and the D&H.

Here is the definition of a holding company from Wikipedia:
A holding company is a company that owns part, all, or a majority of other companies' outstanding stock. It usually refers to a company which does not produce goods or services itself, rather its only purpose is owning shares of other companies. Holding companies allow the reduction of risk for the owners and can allow the ownership and control of a number of different companies. Eighty percent or more of voting stock must be owned before tax consolidation benefits such as tax-free dividends can be claimed.

Wiki's description definitely fits Dereco. It allowed N&W to acquire EL and D&H, without having direct responsibility for EL's debt. Dereco lasted 4 years, while the N&W tried to make the EL profitable. The situation became hopeless when EL declared bankruptcy in 1972, and Dereco was quickly dissolved as a business entity. The three RRs did continue some joint operations until April of 1976, when Conrail took over most of EL's tracks east of Akron, OH.

As a final footnote, N&W paid the EL estate $5.5 million in August of 1976 because it had taken advantage of EL's losses during Dereco (1970-'72) for tax purposes.

[tomjohn]

Thanks Matt

It did help.....

[ThePointyHairedBoss]

Matt, I hate to rain on your parade, but DERECO exsisted until 1982.

DERECO divested itself of Erie Lackawanna when it was absorbed into Conrail in 1976, but the solvent D&H remained a DERECO subsidiary. With D&H Begging to be included in the NS merger (much to N&W and Southern's displeasure), DERECO sold the D&H to Guilford, leaving it an empty shell. It was absorbed into the N&W by the late 1980's.

[webnauseam]

you might find this interesting, about te final disposition as a donation to the U of V.

http://erielackhs.org/EL/ELHOME.html

[erie2521]

The book by H. Roger Grant entitled "Erie Lackawanna - Death of an American Railroad, 1938-1992" has a whole chapter on Dereco. Ted

[Matt Langworthy]

Matt, I hate to rain on your parade, but DERECO exsisted until 1982.

DERECO divested itself of Erie Lackawanna when it was absorbed into Conrail in 1976, but the solvent D&H remained a DERECO subsidiary. With D&H Begging to be included in the NS merger (much to N&W and Southern's displeasure), DERECO sold the D&H to Guilford, leaving it an empty shell. It was absorbed into the N&W by the late 1980's.

Sorry, dude... I hate to rain on your parade but http://www.bridge-line.org/blhs/history.html reports DERECO being dissolved in 1972. This is supported by http://en.wikipedia.org/wiki/Delaware_a ... on_Railway as well.

[Engineer Spike]

I have heard this at work on the D&H. The $1,000,000 question is how did the N&W insulated itself from the D&H from 1972 until Guilford purchase? The D&H came close to failing, especially after the expansion in 1976. A yardmaster said that the D&H had to scrap old boxcars once to make the payroll.