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.

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Re: Why did the PC merger fail?

Postby jamoldover » Tue Aug 09, 2016 11:32 am

CPF363 wrote: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.


You're forgetting a couple of things here --
The PC merger process was started in the early-to-mid 1960's. Amtrak wasn't even a gleam in anyone's eye until almost 10 years later. Amtrak was formed as part of a response to the PC bankruptcy, so no PC, no Amtrak.

Also, you say the conditions "were not worth it in the end". That assumes that the teams working toward the merger had a way of knowing what would happen over two decades later. If your ability to predict the future is that good, I want to know which stocks to invest in... :-)

The wholesale abandonment of redundant lines that took place under Conrail was only allowed once Congress and the ICC (later STB) saw the direct results of the policies that railroads had been complaining about for years. Without those changes in the rules, we would still have a broken-down, rule-bound, unprofitable railroad industry. While I'm not in any way a fan of PC, without the PC merger and bankruptcy, we wouldn't have a healthy railroad industry today.
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Re: Why did the PC merger fail?

Postby Gilbert B Norman » Tue Aug 09, 2016 12:45 pm

Actually Mr. Moldover, the PC merger was first proposed during November 1957 (link may be paywalled)

http://timesmachine.nytimes.com/timesma ... geNumber=1

Freebie:

https://news.google.com/newspapers?nid= ... 9592&hl=en
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Re: Why did the PC merger fail?

Postby ExCon90 » Tue Aug 09, 2016 3:17 pm

That's an interesting comment about "spun off north-south lines in the Midwest to the Southern and L&N." One of the reasons those lines were poor revenue earners was that Southern divisions of revenue (prescribed by the ICC, and immutable) were very much better than the Northern divisions (north and south of the Ohio and Potomac, basically). It seems likely that if the Southern roads had been offered those lines by the PRR they would have taken a good look at the additional revenue compared with the costs of acquiring and operating those lines and wanted no part of the deal. They were much better off taking over the traffic at Cincinnati and Louisville (and the revenue that went with it) and letting the PRR, NYC, etc., make the best of their meager revenues north of the Ohio. There would also have been a memorable proceeding before the ICC involving railroads--and shippers, and lawyers--all over the Northeast, Midwest, and South, and dragging on for years.
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Re: Why did the PC merger fail?

Postby H.F.Malone » Mon Sep 05, 2016 4:04 pm

Bevan and Saunders had no interest in improving the railroad--- it's quite apparent that they would rather have dumped the railroad assets of the Pennsylvania Company and concentrated on more "modern" investments, like amusement parks and executive jets.
"You can't always get what you want, but if you try sometimes, you just might find you get what you need."
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Re: Why did the PC merger fail?

Postby BandA » Wed Nov 16, 2016 3:47 am

After reading about the merger, I cannot understand why the New York Central didn't have the intestinal fortitude to just say no when the New Haven was thrown into the mix. NYC would have been better on their own.

How long would the PRR, NYC and NH been able to continue to operate if the merger had not taken place? NH was already bankrupt, so some type of liquidation sale would probably have happened.
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Re: Why did the PC merger fail?

Postby Tadman » Thu Mar 30, 2017 8:43 pm

Matt Langworthy wrote: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, I don't mean to be disrespectful, but I place little to no stock in that story. The author, Don Phillips, is a grouchy old man with an ax to grind. He was a long-time Trains Mag contributor and Washington Post author, and the Post dumped him perhaps ten years ago. Since then, his monthly editorial has basically been "I hate Joe Boardman and let me waste a column telling you why through unnamed sources, innuendo, and scary words". I pretty much quit reading Trains Mag over this, because it got really old, even if it was true. Unfortunately, Mr. Phillips rarely cited sources, just prattled on and on with unsubstantiated accusations against Mr. Boardman. Compare that to the state the railroad is in - new routes, new cars, ridership up, and it's hard to believe he's been all that bad.

Cutting to the chase, when he wrote the story about the PC for Classic Trains Mag, he did the same thing. He regurgitated the story as many books tell it - "Wreck of the PC", "No Way to Run a Railroad", "The Men Who Loved Trains", etc... and added a few tidbits. The naked stewardess story was one of them. None were substantiated in any way, I.E. Citing a source or corroborating party. The PC merger had enough going against it and we don't need "Fake News" corrupting history. Mr. Phillips should consider hanging up his typewriter ten years ago.
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Re: Why did the PC merger fail?

Postby Tadman » Thu Mar 30, 2017 8:45 pm

BandA wrote:After reading about the merger, I cannot understand why the New York Central didn't have the intestinal fortitude to just say no when the New Haven was thrown into the mix. NYC would have been better on their own.

How long would the PRR, NYC and NH been able to continue to operate if the merger had not taken place? NH was already bankrupt, so some type of liquidation sale would probably have happened.


That thought bounces around in my head frequently. Here's a question I have: Why didn't PC make the NH a full subsidiary, like N&W did with Dereco/EL/D&H? I always suspected N&W did that so they could eventually shake the Dereco roads, which were meager earners. They eventually did just that.

Perhaps the ICC said no, perhaps there were other reasons not to. But it's an interesting question.
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