Why did the PC merger fail?

Discussion relating to the Penn Central, up until its 1976 inclusion in Conrail. Visit the Penn Central Railroad Historical Society for more information.

Moderator: JJMDiMunno

Re: Why did the PC merger fail?

Postby Big E » Thu Sep 08, 2011 11:07 am

as a former block operator on the PRR side of the merger from 1958 to 1973, i believe the two completely different ways of operating a railroad were just incompatible. PRR was rule 108 ( in case of doubt or uncertainty, the safest course or way must be observed). the NYC was , move the train from A to B and we will sort out the problems later! The union people had no choice but to merge to do our jobs, but the oficials were so used to doing their jobs their way that they would not change. I got my severance and was immediately asked to go back to work on the "Central" side in Buffalo. I was qualified on the Pennsy side and worked there but also qualified on the Central side main line towers. What a stark difference in the way trains were moved!

My uncle was an official on the Pennsy side and we had many talks about these differences. I finally had a bellyfull in 1973 and resigned.

I was working the "Presidents Reports" when I quit, in the New York Central Terminal.
Big E
 
Posts: 4
Joined: Mon Sep 05, 2011 9:17 am

Re: Why did the PC merger fail?

Postby XBNSFer » Fri Aug 17, 2012 4:50 pm

Lots of good discussion here, but something that is missing is this: BOTH the NYC and the PRR were money losers AS RAILROADS long before the P-C merger ever took place. Both were kept afloat by their "diversified holdings" (i.e., businesses they "invested" in so they had some profits to prop up the money-losing railroad). The whole point of the P-C merger was to generate cost savings from the elimination of duplicate main lines, branch lines, and terminals in order to consolidate operations into a system that was smaller and therefore more cost-effective. This, of course, they were not allowed to do.

The NYC and PRR operated in the worst possible environment for railroads at that time. The northeast was densely populated, with lots of cities (and thus, lots of terminals) and short line hauls, and their properties were taxed at obscene levels, because they were businesses that couldn't pull up stakes and move to the sunbelt (as much of their customer base was doing through this period).

If you want a general reason for the failure of the merger, you're asking the wrong question. The individual railroads were not viable businesses given their operating environment BEFORE they were merged. Why? Government regulations that still treated the railroad industry like it was a transportation monopoly, half a century after it was no such thing. Government subsidized competing modes, including highways, waterways, and aviation, such that much profitable business for the railroads was lost - yet they were forced to continue servicing the business left without the ability to rationalize their physical plant to match their reduced needs, and were not allowed to charge profitable rates (or lower rates to prevent loss of business that if not lost would still be profitable at the reduced rates). In addition, the ridiculous featherbedding of organized labor (including "firemen" on DIESELS, brakemen on road trains whose job was mainly to enjoy the scenery, "full crew" laws in certain of their states of operation that required even MORE superfluous crew members, 100-mile "days," etc.) prevented the railroads from making a profit even if they could get and keep the traffic, because their trains were infinitely more expensive to run than they should have been.

The claims that mismanagement, deferred maintenance, incompatible computers, management styles, etc. are the reason for the failure of the P-C merger are not correct. The seeds for the failure of BOTH railroads were sown prior to the merger. All of these issues may have hastened the speed with which the edifice collapsed, but it was going to collapse anyway without what ultimately resulted FROM the collapse. Remember Conrail in its early years looked like little more than a big blue PC, with similar results. Continued operating losses, despite stupendous sums of money being poured into track and equipment, and the repeated need for more infusions of taxpayer money to keep it going, were the norm in those days. Only after CR was able to shed commuter operations, drive away unprofitable business, price the business it did pursue freely, abandon excess trackage, and whittle down crew sizes (and stop paying the "job for life" labor payments) was CR able to become a profitable enterprise. Given these freedoms, it is quite possible that not only NYC and PRR but EL and perhaps even other northeastern RRs could have survived, but it took the imminent collapse of the entirety of northeastern railroading to wake up the idiots in Washington to the mess that they created in the first place.
GE, not EMD, makes the best locomotives now; has for over 20 years. Get over it.
XBNSFer
 
Posts: 90
Joined: Fri Aug 06, 2004 9:56 pm
Location: Bridgeport, CT

Re: Why did the PC merger fail?

Postby wdburt1 » Sun Dec 09, 2012 6:30 pm

Right on.
wdburt1
 
Posts: 79
Joined: Sun Mar 14, 2004 9:06 pm

Re: Why did the PC merger fail?

Postby Tadman » Fri Feb 22, 2013 10:51 pm

I think that's a pretty darn good explanation. The merger was essentially a stalling tactic (and a mediocre one at that) used to stave off an implosion. An implosion caused by so many different sources that it was almost impossible to stop.
Tadman
 
Posts: 8479
Joined: Wed Sep 01, 2004 10:21 am
Location: Michigan

Re: Why did the PC merger fail?

Postby Gilbert B Norman » Wed Aug 07, 2013 4:30 pm

Here is a lengthy New York Times Magazine article from 1974 that I stumbled into and may prove worthwhile, 39 years later, to students of the Penn Central collapse (you may or may not be able to access it on the freebie):

http://query.nytimes.com/mem/archive/pd ... 5B848BF1D3
Gilbert B Norman
 
Posts: 12929
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Aurora Sub; MP 18.71)

Re: Why did the PC merger fail?

Postby CPF363 » Sat Mar 29, 2014 4:51 pm

When the Penn Central went bankrupt on 21 June 1970, how much debt did they have? How much debt did the Lehigh Valley Railroad have along with their other subsidiaries?
CPF363
 
Posts: 631
Joined: Mon Apr 20, 2009 9:00 pm

Re: Why did the PC merger fail?

Postby FLRailFan1 » Sun Mar 30, 2014 3:49 pm

I wonder if the NH would have survived until 1976? I think if Congress did not force PC with the NH, I bet the NH would be around. At least on my railroad layout. The NH DID survive without help from Congress and in 1976, the NH took over lines from ConRail.
FLRailFan1
 
Posts: 321
Joined: Thu Apr 11, 2013 10:39 am

Re: Why did the PC merger fail?

Postby Gilbert B Norman » Sun Mar 30, 2014 4:23 pm

I'm inclined to agree Mr Railfan, but it would have been absorbed into Conrail on C-Day.

Merger into the PC was simply seen as the most expedient way to discharge the Estate from bankruptcy. If only the Trustees could have , or maybe chose to have, seen behind the 'smoke and mirrors'.
Gilbert B Norman
 
Posts: 12929
Joined: Fri Mar 12, 2004 6:52 am
Location: Clarendon Hills, IL (BNSF Aurora Sub; MP 18.71)

Re: Why did the PC merger fail?

Postby ExCon90 » Mon Mar 31, 2014 1:30 pm

FLRailFan1 wrote:I wonder if the NH would have survived until 1976? I think if Congress did not force PC with the NH, I bet the NH would be around. At least on my railroad layout. The NH DID survive without help from Congress and in 1976, the NH took over lines from ConRail.

Which lines would those be? The NH was merged into PC before Conrail was formed, as mentioned above.
ExCon90
 
Posts: 3491
Joined: Thu Sep 18, 2008 1:22 pm

Re: Why did the PC merger fail?

Postby FLRailFan1 » Wed May 28, 2014 7:37 pm

As I said on my model railroad, I pretend that the NH received the Erie Chicago line, the B&O Ohio line, the Xenia to Yellow Springs (Ohio) line and the NH reorganized into a holding company of railroads. Of course, that is why I love model railroading...you won't lose $$$ on routes that are - in real life - money losers. :-D
Last edited by Jeff Smith on Sun Jul 31, 2016 3:19 pm, edited 1 time in total.
Reason: Remove immediately preceding/nesting quotes
FLRailFan1
 
Posts: 321
Joined: Thu Apr 11, 2013 10:39 am

Re: Why did the PC merger fail?

Postby Engineer Spike » Thu Mar 10, 2016 8:06 pm

One point that was never mentioned in the four pages was labor protection. Mr. Saunders made agreements not to eliminate any jobs. When business was down, nobody could be cut off. Much of this lasted until Stanley Crane was backed against the wall. Uncle Sam was ready to cut its losses, and sell off Conrail. Crane showed the books and made the deals so they could continue, and eventually become profitable. You can read this in The Men Who Loved Trains. There is also inference to this in Wreck of the Penn Central.
"Welcome all ye who enter; the show that never ends. Tingfield Sperminal Railway." (Graffiti on the entry to Mohawk Yard Office)
Engineer Spike
 
Posts: 1662
Joined: Tue Mar 16, 2004 3:24 pm

Re: Why did the PC merger fail?

Postby Matt Langworthy » Tue Jun 28, 2016 12:33 pm

Several other magazines discussed the 40th anniversary of Conrail's formation in their spring issue. According to the CR article in Trains, a very damning piece of evidence against Penn Central was withheld from the public that explained the reluctance of Congress to act in 1970. The Congressional committee had gotten photos of Saunders' underlings with naked stewardesses on a PC corporate jet. The feds' decision to not bail out PC was a no-brainer. It really shows just how corrupt Penn Central's upper management had become. They really thought they could do anything.
Matt Langworthy

"It is highly likely that the 1990s were an overrated decade."
User avatar
Matt Langworthy
 
Posts: 3147
Joined: Thu Jan 27, 2005 8:02 pm
Location: Rochester, NY

Re: Why did the PC merger fail?

Postby CPF363 » Sat Jul 30, 2016 9:11 pm

What were the compelling reasons why James Symes of the Pennsylvania Railroad decided to go ahead with merging with the New York Central? With the condition of divesting the PRR's lucrative interest in the N&W for the merger, wouldn't that be reason enough to say no? Seems that conventional wisdom indicates that this decision was not a good one for the PRR's stockholders and or interests. It is surprising that management from the Main Line did not find a way to keep the system that they owned, influenced or profited from together rather than breaking it apart, that being the PRR-N&W-Wabash-DT&I verses merger with the NYC. Had a good railroad management been in place verses Symes-Saunders-Bevin, the PRR might have fared relatively well if investments were made in the system and certain lines spun off or out right abandoned verses creating a Penn Central Railroad that ultimately failed.
CPF363
 
Posts: 631
Joined: Mon Apr 20, 2009 9:00 pm

Re: Why did the PC merger fail?

Postby Allen Hazen » Sat Jul 30, 2016 10:58 pm

CPF363--
I think the New York Central was the more reluctant partner: it was in (somewhat) RELATIVELY better shape financially (and, under Penn Central, the horrible examples of deferred maintenance tended to be more on the PRR and NH lines than NYC), and (until a late 1950s recession hit) thought they would be able to make it on their own.
Allen Hazen
 
Posts: 2340
Joined: Fri Mar 12, 2004 10:14 pm
Location: Edmonton, Canada (formerly Melbourne, Australia)

Re: Why did the PC merger fail?

Postby CPF363 » Sat Aug 06, 2016 5:31 am

I appreciate your comments. However, I am under the impression that the PRR did not need to do the merger with the NYC in the first place. The expensive conditions placed upon the merger, most especially the divestiture of their N&W stock, were not worth it in the end. Instead, the PRR should have invested and modernized in its own core east-west railroad and spun off north-south lines in the Midwest to the Southern and L&N railroads (didn't the Southern want to purchase the DT&I at one time?) and worked an arrangement with Amtrak, the U.S. Government and the ICC for their purchase and operation of the Northeast Corridor and Keystone electrified lines in exchange for getting control and rebuilding the Reading Railroad during their bankruptcy in 1971. If they made it to the 1980s with good management in place, they could have petitioned the ICC for a PRR-N&W-Wabash merger which would have resulted in essentially what we now have in the Northeast with Norfolk Southern's network without a Penn Central bankruptcy, creation of and subsequent breakup of Conrail.
CPF363
 
Posts: 631
Joined: Mon Apr 20, 2009 9:00 pm

PreviousNext

Return to Penn Central

Who is online

Users browsing this forum: No registered users and 1 guest