What If: Pennsy In Operation today as Pennsy.

Discussion relating to the PRR, up to 1968. Visit the PRR Technical & Historical Society for more information.

Postby HSSRAIL » Tue May 09, 2006 3:35 pm

My biggest issue is once merger was decided on other options were not looked at. I knew someone whose dad was in management at the Pennsy and he said that once Conrail got rid of the commuter trains they became profitable.

I blame the Pennsy's board of directors for the debacle. It was very apparent that neither James Symes or his successor Stuart Saunders believed that Pennsy had a future. It was up to them to elect a management that believed in the future. What the merger did was let everyone keep the status quo going from 1957 to 1968 and not look at the future as the merger was going to cure all the problems? There were people capable of turning the PRR around it would not have been pretty and the person they needed to select would have been a son of a creep but it could have been done. Pennsy would have had no passenger trains by 1960 and most of the multiple track mainline would have been gone and replaced with CTC. The Pennsy would have probably taken a big strike something that the big shippers who sat on PRR's board would never have stomached. But if the board had done what they needed to do starting in 1958 they might have survived.
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Postby M&Eman » Tue May 09, 2006 6:30 pm

HSSRAIL wrote:My biggest issue is once merger was decided on other options were not looked at. I knew someone whose dad was in management at the Pennsy and he said that once Conrail got rid of the commuter trains they became profitable.

I blame the Pennsy's board of directors for the debacle. It was very apparent that neither James Symes or his successor Stuart Saunders believed that Pennsy had a future. It was up to them to elect a management that believed in the future. What the merger did was let everyone keep the status quo going from 1957 to 1968 and not look at the future as the merger was going to cure all the problems? There were people capable of turning the PRR around it would not have been pretty and the person they needed to select would have been a son of a creep but it could have been done. Pennsy would have had no passenger trains by 1960 and most of the multiple track mainline would have been gone and replaced with CTC. The Pennsy would have probably taken a big strike something that the big shippers who sat on PRR's board would never have stomached. But if the board had done what they needed to do starting in 1958 they might have survived.


Like the EL, NYC, NH, and CNJ all did and got absorbed into Conrail anyway
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Postby MichaelWinicki » Fri Jan 19, 2007 9:56 pm

This is a wonderful thread... wish I had found it earlier.

And while my thoughts are specific to the PRR, I think they apply to most of the railroads.

Some folks brought out some powerful reasons why the PRR was in the shape that it was in during 60's & 70's and while I agree that I don't think it would have survived as an independent entity beyond the mid-70's I think it's important to consider a major reason WHY the railroads fell like dominoes during the latter half of the 20th century.

And obviously there are many reasons that I think we would universally agree on...

The de-industrialization of the country
The interstate highway system
High/unfair taxation at the local and state level
High labor costs tied to inflexible labor unions
Federal regulations

The one reason that I see very rarely ever brought up but one that I truly think ranks up near the top is the lousy marketing the railroads did to "sell" their service.

I've read a lot of material put out by the railroads over the last half of the twentieth century and being a "marketing geek" myself I'm shocked how lousy of a marketing job most railroads did.

Here, regardless of the interstate highway system, they had (and still maintain) a large cost advantage over tractor-trailers. But most marketing materials I've encountered almost give an air of "Well we're the railroad and if you want to do business with us-- fine. But you're going to do it on OUR TERMS".

The railroads seemed to have this (false) perception that companies should ship with them-- just because they were the PRR or the NYC or the B&O or whatever road you wish to substitute.

While many businesses/industries today (not as many as we would like as consumers) seem to accept the term "Customer Service" as it was intended-- "to serve the customer"... most railroads would have had to improve just to have bad customer service.

I've heard stories from businesses in my area of what it was like dealing with the Pennsy, then the PC, then CR and now the NS... And honest to God it doesn't seem to have changed much.

I think much of this came from the point of view that railroads-- at least the larger ones lost their "taste" for serving small customers a long, long time ago. And the ones that did stick it out were more or less put through the "wringer" as far as how they were treated.

While we all know of the gradual de-industrialization of the the U.S. predominately in the northeast and midwest, how would things have changed if this industries were treated like partners rather than "pains" that needed to be serviced every day or every few days? You know getting deliveries made on time... at a reduced cost that the railroads could provide? How many businesses that went out of business or moved out of the U.S. entirely could have stayed in business if their transportation partner--i.e. the railroads had treated them like any business should treat a customer?

I don't know why there wasn't more of a push to service retail type customers quite frankly. Just for grins count the number of tractor-trailers that go to a Wal-Mart or Home Depot everyday. Granted this transition had to start decades ago but the fact is there are still a lot of goods being moved in this country every single day.

But I'm not suggesting there still isn't industrial business to be had still. Where I live there are numerous factors/distribution centers that see many tractor-trailers loaded and unloaded every single day--- but no railroad transport... even the ones that are adjacent to the railroad. To me this is stunning. Here these businesses could save a great deal on shipping costs by shipping via train but there is no spur... and in some cases there is a spur-- but is never used. Why?

I think the "why" is because the railroads in this country had for the longest time the misguided notion that their "crap didn't stink" to put it bluntly. They had no interest in serving the small customer or even it seems a slightly larger customer. They wanted lots of carloads every single day-- and if you as a business couldn't do that you were basically treated as the proverbial "red-headed step-child".

I think there is a lot of blame that can be handed out on why the railroads in the U.S. fell as far and as fast as what they did but I think a lot of it has to start with the mindset each railroad had as far as serving customers and marketing their service to businesses that were not yet customers.

And it's a problem that continues to this day.
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Postby Rick F. » Thu Jul 05, 2007 10:03 pm

I agree with what has been said about PRR territory in the east and midwest. The decline of the domestic auto industry, manufacturing in general, and the collapse of the steel industry, would mean that the PRR today would have a severly eroded trafic base.

All you have to do is look at what's happened to on-line towns and cities. I see cities like Cleveland, Pittsburgh, Trenton, Philadelphia, and others are continuously losing industry. Last I heard Trenton has lost 80% of it's manufacturing base.

When you see the smaller cities and towns along former PRR lines you see a mass exodus of industry and a large decline in population.

Here, in eastern Ohio smaller towns like Salem, Alliance, Youngstown, Warren, Massillon, and Canton have suffered quite a bit. My own hometown, Warren, has seen it's population decline from about 69, 000 in 1969 to about 45, 000 today.

In western Pennsylvania, Greenville, Sharon, Sharpsville, and Newcastle have maybe even fared worse.

We've hashed this out a few times on the EL list. About the only thing you can say is that there may have been an increase in traffic FROM CHINA and the far east in containers.

Some of this decline in manufacturing is a matter of Federal Government policy. I mean that the USA has been a patsy in international trade.

The corporations here would rather manufacture their goods overseas. That way they can avoid certain taxes, environmental law, unions, paying pensions, providing medical insurance, and being good corporate citizens.

Instead, greedy corporate exectives and hedge fund managers make obscene amounts of money while forcing wage and benefit cuts for whatever American workers they have left.

In closing, it would be very hard for the PRR to turn a profit in today's economy. :(
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Postby pennsy » Fri Jul 06, 2007 12:30 am

Hi All,

Interesting concept. One would have to assume that leadership of the calibre that made PRR great continued on, and the PRR continued to declare dividends to its stockholders as it did in the past.

One would also have to assume that some pieces of equipment, such as the ubiquitous GG-1's would never be allowed to "wear out". In fact, it would not be too much to imagine brand new ones either replacing ones beyond repair, or as I suggested some time ago in another thread, a brand new version, the GG-2.

And there would still be B-1 switchers running around Sunnyside yards etc. They might even have considered a new version, the B-2. It really bogles the mind once you let your imagination run wild, within reason. Of course, as I stated in my thread dealing with winning the lottery and having Big Bucks to spend, I would undoubtedly have quite a few shares in the PRR, and so my voice would be heard.
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Postby pdman » Mon Aug 27, 2007 5:59 pm

In the late 1950s the Pennsy had 57 full vice presidents (not including assistant vice presidents, and several "assistant to assistant vice presidents." Whenever any company is so top heavy with such management types most of the organizational focus becomes how everyone stays in their job and competes against their peers. That means fewer people look outside the organization to search for how to compete, how to gain new business, how to create greater profits. It looked like the British aristocracy of the 19th century. In short, the company clogged to a stop with organizational cholesterol. Decision making slowed to a stop, no new major investments took place, maintenance became more deferred, and a smaller tomorrow attitude crept into the thinking.

The corporate culture attitude then becomes that improvement in profits can only come from sending out battallions of auditors to cut costs, eliminate jobs, etc. all of which were cuts below the level of vice presidents (but not at their level and above). When that happens in any company it is only a short time when it will tank completely. As the philosopher Voltaire once said, "Accountants know the cost of everything but the value of nothing." The Pennsy at that point seemed to give up on top line revenue growth and instead sought to maximize short term cash retention. It's a history that can be used as a template today to determine which current day companies will not be around in five years.

If the Staggers Rail Act had been passed in the middle 1950s and the financial world was what it is today, I bet several private equity firms would have banded together to buy it, dismember its weak parts, and make it into something that exists today. That process would have been more wrenching, but it would have happened faster than the Pennsy, CR, etc. history path that we know.
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Postby pdman » Tue Aug 28, 2007 2:58 pm

More....

I have to go back and look up the exact numbers, but I believe the Pennsy paid dividends which were in greater total than the amount of cash earned by the company for every year after around 1954. No company can survive long that way. Too, they actually had to borrow money through selling bonds in order to cover their dividend payments. Today, you can find that simple measure in most financial statements: Percent of earnings paid in dividends." The Pennsy was over 100%.

I agree whole heartedly above about the inability of railroads to market and even sell. I was in the industry in the late 60s and at our carrier the sales people were an embarrassment to watch with customers. They made up for it by covering golf outings, however. A friend of mine once said, "If railroads were hired to do marketing for Kentucky Fried Chicken, the ad verbiage would read, 'We sell warm dead meat.' "

The NYC was a bright light in this period with Al Perlman's approach to marketing.
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Postby wdburt1 » Wed Aug 29, 2007 6:19 pm

The last two posts by pdman: Damn that's good. Right on target.

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Re: What If: Pennsy In Operation today as Pennsy.

Postby 2nd trick op » Mon Oct 20, 2008 9:18 pm

In speculating on a PRR/Erie(Lackawana) merger, Matt Langworthy wrote:

The line to "die" would have been the old Buffalo & Southwestern, which would have been rendered superfluous by the nearby (and vastly superior) ex-NKP line. BS&W probably would been sold off to a shortline, just as NYLE and BSOR control segments of it now.


You'ld have to add the Pennsy's Chautauqua/Salamanca/Allegheny Branches to the list of casualties. Those lines formed a link between Buffalo, and its Canadian gateway, and the principal classification yards at Pitcairn and, later, Conway, with a side route to Olean on the Northern Region main diverging at BRIDGE Tower in Oil City. PRR maintained two Pittsburgh-Buffalo symbol freights in each direction on these lines until well into the 1960's. My guess is that the classificaion responsibilites would have been reassigned to the joint LV/EL facility at Bison Yard, and Pennsy's Ebeneezer yard closed.
Last edited by 2nd trick op on Tue Dec 30, 2008 11:50 am, edited 2 times in total.
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Re: What If: Pennsy In Operation today as Pennsy.

Postby rrfoose » Tue Oct 21, 2008 12:03 pm

Maybe they would be lugging tonnage around the curve with locos like these?

http://www.trainweb.org/southpenn/images/Painted%20GIFs/PRR%20SD70ACe%204300.gif

Enjoy!
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Re: What If: Pennsy In Operation today as Pennsy.

Postby Trackbolt » Tue Nov 11, 2008 6:34 pm

I don't know if there would be a Pennsy today but it does lives on. I believe every time I see a NS train that I am seeing the Pennsy. I say the same about CSX as it might as well as be the NYC. Both probably should have happened long before Conrail in 1976 and the Conrail break up of the 90's. There would not have been a PennCentral. The NW and the C&O were a couple of rich hillbillys but they prevailed over time. In reality it is my speculation that if the NW and Pennsy had merged in the late 1920's or 1930's the operations would be near what they are today given the development of the private automobile, truck and airlines. Not to mention the decline of coal as a heating fuel and the decline of heavy industry. The NW would have moved to reduce all of Pennsy's excess capacity as well as pare the passenger operations after WWII. That has been my take.
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Re: What If: Pennsy In Operation today as Pennsy.

Postby pennsy » Tue Nov 11, 2008 8:06 pm

Thank you, I thank you, and the entire U.S. Air Force thanks you.
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Re: What If: Pennsy In Operation today as Pennsy.

Postby GulfRail » Fri Nov 06, 2009 11:18 pm

The real problem was management. They just couldn't fathom that the "mighty Pennsylvania" was on a downhill path, so they invested in risky real-estate ventures. If somebody like Jervis Langdon Jr. had become the PRR's president instead of Saunders, then we might have seen the PRR make it long enough until deregulation was passed and it reunited with the N&W. Saunders was, to put it bluntly, an imbecile. That may seem harsh, but its true! Whenever he got permission to dump a passenger train from the I.C.C., he'd just make a costly deal with labor. In one instance that I recall, the Pennsy could have saved $3.4 million dollars a year had it discontinued a passenger train (that the I.C.C. approved of), but instead Saunders made an agreement with labor. He had no clue how to run a railroad, and it shows. Sure, he ran the N&W, but that's a novices railroad. You can just sit back and let those black diamonds go downhill to Lambert's Point. Not much talent in getting a goose that lays golden eggs to make money. Bevan was another part of the problem. He was too concerned with real estate to care about the railroads finances. In his mind it didn't matter if the railroad was in good shape and making money, all it mattered was that you used it as a tax haven to buy real-estate to make the Pennsylvania Company look good. SP did the same thing, and if it hadn't been for Anchutz, the railroad would have been in the same boat as the PRR. Infact, the D&RGW and the N&W are comparable in many ways. Both were small, but profitable mountain railroads who hauled coal, nursing a badly managed parent. Bevan threatened to quit if someone from outside the PRR was nominated, and even made a hissyfit about Saunders. If he had quit, then a more competent man could have taken his place, and Saunders could have gotten a job as the chairman of some real-estate firm.

People often will say that the PRR had no chance of making money because of the regulation. But the B&O served the same region, and through smart management, it was able to become a strong railroad again. The B&O and the PRR were in the same boat in the late 1950's. The B&O took a path to revitalize itself, the PRR just convinced itself that everything was fine. The B&O's management made lemonade out of sour lemons (that's why the Chessie System used YELLOW :wink: ), while the PRR just drank the lemon-juice straight from the lemon. They were too focused on the past, and not focused enough on the future. They also placed all their bets on the Penn Central merger. Any wise manager knows that you should prepare for the worst case scenario and have a plan-B. Perlman did that. He invested in his railroad and courted the C&O. Did the PRR do that? No. What about the dividends? Norfolk Southern paid consistent dividends since its formation in 1982, but when it stumbled after acquiring Conrail, it decided to slash the dividend because it simply could not pay it without placing a significant dent in its finances. If the PRR had cut the dividend or suspended payment alltogether, they would have lost some prestiege, but they wouldn't have gone down in flames.

When the N&W's stock was sold for a hefty $350 million dollars in 1964, some directors proposed investing it into the railroad. If they had done that, they would have been able to cut costs and improve their operations. The new yard at Columbus would have been built, and who knows, maybe the PRR could have diversified into more ventures like Buckeye Pipeline. Santa Fe Industries, Union Pacific Corporation, Burlington Northern and the Southern Pacific Company all invested in natural resources, and it paid off. Of course, the problem with both SP and the PRR was that they had "fun" with flashy subsidiaries like Sprint and Great Southwest Corp., instead of building up solid investments like Buckeye or Black Mesa. The Dividends from Buckeye actually exceeded those from the N&W's stock ($36 million vs $20 million), and they could have been used to refurbish the company. Not to mention, the $64 million made from selling the LIRR to the NYDOT could have been used to pay for the Metroliners AND the Columbus yard with ease. I read somewhere that the Penn Central had I.C.C. permission to abandon 5,800-miles of unprofitable branchline trackage, but that Bevan refused because the tax losses from those branches could be used for diversification and real-estate deals. According to statistics from Conrail (circa 1977), every 300-miles of excess trackage cost $1 million dollars in maintenance each year. If the PC had gone and abandoned the trackage that the I.C.C. allowed them to abandon, they would have saved $19-Million dollars A YEAR in costs. But Saunders labor agreements would have nullified all savings from that.

That brings me to my next point. If Saunders hadn't made those costly deals with labor, then he could have cut the workforce, much like perlman did. He even had the idiotic notion to rehire former NYC employees (1,000 mail handlers) that had been laid off BEFORE the Penn Central merger and re-imburse them for the wages they had lost, PLUS paying them a fee. Why did he do this? So that he could get labors support. This is asinine! The main hope of the Penn Central merger was to cut costs by reducing labor and facilities. For every 10,000 workers it would let go, the Penn Central would be forced to pay $100 million. And that's not even the worst part. The Penn Central was forced to take the New Haven in, but when the deal was originally written, they wouldn't have had to have paid a dime. But what did Saunders do? He paid the NH trustees $140 MILLION so that connecticut would be ecstatic! Why pay for a turd when you can have it for free. I guess Saunders just thought the political gains would outweigh the losses. He paid for it with his job and his prestige. After the PC debacle, he lived the rest of his life as a recluse in his manor in Virginia.

My point is, if Langdon (for example) had gone to work for the Pennsylvania when it was still solvent (not PENN CENTRAL when it was bankrupt), he could have turned that organization around. Sure, he would have ruffled some feathers, but he did that at the B&O, and wouldn't you know it, the B&O remained in the black from the end of his tenure to the day it became part of the Chessie System in 1973. Some might say Langdon's failure to turn around the Penn Central is evidence that a man like him couldn't have turned the Pennsylvania around. But that was AFTER it had diversified, made costly deals with labor, and had been in bankruptcy for several years. If Howard Butcher III (the man who chose Saunders, because he thought that he would get along better with Perlman) had chosen Langdon (who had just left the B&O) instead of Saunders in 1963, think of what he COULD have done. The money made from the sale of N&W stock could have been poured back into the railroad, and Buckeye Pipeline could have been the only non-rail investment made (for $84 million too!). Then the LIRR sale would have helped to modernize the railroad further. Perhaps Perlman and Langdon would have called the PC merger off when they heard that they would have to take in the New Haven. This would have avoided a major debacle, and while the NYC and PRR would have made meager profits ($7 million and $9 million, respectively), they would have been safe enough to survive. When agnes hits in 1972, the NYC would be unaffected, and the PRR would have Buckeye pipelines $36 million in dividends to spend. Also, this "mechanized" PRR would have had a more aggressive marketing team, Ala. Perlman's NYC or Langdon's B&O, so their revenues would have gone up.

I actually was writing a scenario where Langdon was made chairman of the PRR instead of Saunders, and as a result, Bevan resigned. The PRR modernized and introduced radical changes in marketing (much like what Langdon did at the B&O), and so both the NYC and PRR were just strong enough to say "no" when the I.C.C. told them "We'll let you merge, IF you take in the New Haven." Because of the Penn Central merger never happening, the Reading wouldn't have lost as much bridge traffic, and other railroads wouldn't be as affected. After Amtrak is formed (It still would have been formed, believe me. Plans were being drafted even BEFORE Penn Central, mainly due to declining service.) When the recession hits in 1975, the weakest of the eight railroads fold (CNJ, L&HR), the Reading is absorbed into the Chessie (no Conrail labor protection, so Chessie is really the only choice) and the PRR and NYC butcher the Erie Lackawanna. Perhaps we would have seen EL locomotives relettered ERIE and DL&W ala. the Conrail split up. When de-regulation is passed (despite what many say, it wasn't a result of Penn Central. It was a result of general industry trends, as well as a move by Carter to deregulate transportation. He did it with Airlines and Trucking, and railroads were always on the agenda. Curious how a "publicly-minded" democrat actually did more good than a "pro-business" republican, (i.e. Nixon) when it came to reform.

With deregulation, the PRR and the NYC would finally be back on track (sorry, couldn't resist the Pun), but they would find that they were still not the giants of railroading that they once were. The NYC would merge with the Chessie System, fufilling Perlman's dream, and the Pennsylvania would re-unite with its old vassal, the N&W. CSX and Norfolk Southern would roll along, and we would have had a very different world. Who knows, maybe we would have seen transcontinental mergers in the 1990's!

Of course, this is all my take on things. Pennsy still could have gone down the crapper, but I still think it all came down to how they handled the situation. The over-regulation just intensified the effects of bad management.
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Re: What If: Pennsy In Operation today as Pennsy.

Postby wdburt1 » Sat Dec 19, 2009 6:34 pm

Wow, what a rant. Obviously in the know, aware of complexities, and opinionated! Great. Was Stuart Saunders a one-trick pony? Yes. Could Jervis Langdon have saved the situation had he got there earlier? Maybe. Would PRR and NYC have "butchered" EL. Well... My guess is that EL--always the nemesis to NYC--would have gone with PRR, and seen its main line west of Mansfield, or maybe Marion, abandoned. The Hornell-central Ohio line would have been downgraded to secondary status, and if you're assuming that PRR still owned N&W, then EL east of Buffalo would have become an alternate route for New England (especially) and NY/NJ. Funny how that looks a lot like what we ended up with. I published an article in 1998 that claimed that, with respect to EL, the Conrail split essentially landed us back where we would have been if we hadn't taken a PC and Conrail detour thirty years long.
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Re: What If: Pennsy In Operation today as Pennsy.

Postby TREnecNYP » Mon Jan 18, 2010 9:00 pm

It would be cool to be able to take a train from levittown to newark, or yardley or morristown to newark or exchange place.

100% electrification may have saved it, but it didn't electrify to chicago, if it had it would be the way to go.

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