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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LCJ

Post by LCJ » Mon Nov 29, 2004 11:52 pm

Wood deck.

Matt Langworthy
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Why the PC merger failed

Post by Matt Langworthy » Sat Feb 05, 2005 4:42 pm

I have to agree with most of the posts I've read here. But there's more to the bankruptcy. Fed, state and local gov't agencies were very loathe to allow ANY abondonments or discontinuences of service. For example, the PRR Elmira Brandh was redumdant (except for a few segemnts) because the ex-NYC Fall Brook Secondary offered a similar routing with better grades and more customers. It took the flood of '72 to get the most redundant sections of track removed. And that's only 100 miles or so of track in a system that had THOUSANDS of miles! Funny how some of those same fed regulators that wouldn't let PC abandon any track in the '60s and '70s were the same jokers who happilyripped up track during the CR era...

Sanders and PRR's management certainly have to shoulder alot the blame for what happened, but let's not forget NYC's pre-merger debacle. NYC had scopped up the very capable Bill White from DL&W in the early '50s. He modernized the entire NYC system. CTC became widespread and the Water Level Route was reduced from 4 tracks to just 2 or 3 in many places. Then Robert Young wins a proxy fight with NYC and ousts White. NYC was never the same- Young committed suicide after the stock failed to produce a quarterly dividend in 1958. Young killed the goose that was laying some golden eggs, leaving NYC in very weak financial shape. N owonder merger looked so attractive.

I've heard rumors that NYC tried to court C&O during the '50s. but I don't know if it's true.

R3 Rider

Re: Why the PC merger failed

Post by R3 Rider » Mon Feb 07, 2005 11:58 am

Matt Langworthy wrote:I've heard rumors that NYC tried to court C&O during the '50s. but I don't know if it's true.
I'll have to check when I'm at home, but I believe the NYC's attempts at a merger with C&O are mentioned in Wreck of the Penn Central.

AmtrakFan

Post by AmtrakFan » Sat Mar 26, 2005 7:51 pm

If Deregulation happened in 67 could they of made it out?

AmtrakFan

Re: Why the PC merger failed

Post by AmtrakFan » Sat Mar 26, 2005 7:52 pm

R3 Rider wrote:
Matt Langworthy wrote:I've heard rumors that NYC tried to court C&O during the '50s. but I don't know if it's true.
I'll have to check when I'm at home, but I believe the NYC's attempts at a merger with C&O are mentioned in Wreck of the Penn Central.
Yes that was the case I read in an issue of Trains many years ago.

walt
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Post by walt » Tue Jun 28, 2005 3:52 pm

AmtrakFan wrote:If Deregulation happened in 67 could they of made it out?
Just saw this question--- my answer would be no. All three railroads were too far gone financially by then ( 1967), and they would still have had the albatross of Phila & NYC area commuter services as well as a large number of unprofitable intercity passenger trains. De regulation in the 1950's, on the other hand, might have helped one or more of the railroads to have survived without a merger.
Please Move to the Rear and Speed Your Ride
( Philadelphia Transportation Company)

Matt Langworthy
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Joined: Thu Jan 27, 2005 8:02 pm
Location: Rochester, NY

Survival?

Post by Matt Langworthy » Fri Jul 01, 2005 2:34 pm

PC would also have needed to shed or rationalize alot of light density lines. The few that were downgraded or removed, like the southern portion of the Elmira Branch, were done so slowly and only after the Flood of 1972. Conrail really did a much better job, in part because the Staggers Act helped them accelerate the process.

So to answer the question: yes- if commuter operations were curtailed and subsidized, light-density lines were removed (or sold to shortlines), freight rates could be adjusted to actual market conditions, and if Sanders was not in charge. Without all of those conditions, then history would pretty much the same as we know it today.
Matt Langworthy

"It is highly likely that the 1990s were an overrated decade."

Noel Weaver
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Another good source of information

Post by Noel Weaver » Sat Jul 09, 2005 12:06 am

There is another good source of information concerning the Penn Central
and that is the book by Peter Lynch simply named "Penn Central Railroad".
For some reason, the New Haven organization will not sell this book but it
is readily available at bookstores and at Ron's Books.
I like this book even though I did not like the Penn Central merger, it
very accurately relates to what the Penn Central was, what they did and
what their operations were like. Fantastic photos too.
Ron's books is currently listing it for $31.50 and it is well worth the price.
Pete knows what he is talking about here, he worked for them throughout
their existance mostly as a trainmaster, I remember him well at Oak Point.
Noel Weaver

LCJ

Post by LCJ » Sat Jul 09, 2005 10:38 am

While I've never seen his books, I do recall Mr. Lynch from his last years at Conrail. He was a staff guy for the transportation VP when I met him. I remember him as someone who usually spoke his mind. Actually, I believe it was this quality that eventually got him canned by the VP Transp (the one famous for firing his own father).

The way I heard it (from someone who was there at the time), the VP made one of his ridiculous pronouncements that were intended to be taken seriously by all in the room. Peter laughed out loud. That was his last day there.

As I understand it, Peter didn't need the job anyway. Later, I believe he was involved with the Housatonic Railroad.

I saw the PC book is available used for about $21. Amazon has it new for $23.07 -- here. I plan to add it my collection, along with his NH book. Thanks for mentioning it.

Another interesting link:

Peter E. Lynch Railroad Collection

conrail_engineer

Post by conrail_engineer » Mon Sep 05, 2005 11:02 pm

AmtrakFan wrote:If Deregulation happened in 67 could they of made it out?
That is an excellent question...being a noobie, I hadn't seen it before. I'm neither a business analysist or a former manager, but I'll go on a limb here.

The short answer is YES.

How? One problem the railroad has faced in the twentieth century, is the same problem the landline telephone companies and other heavily-regulated businesses face today: INERT MANAGEMENT, that doesn't know how to innovate and that is not motivated.

Excessive regulation does that. It nearly destroyed the American motor industry...it took Japan to lead the way in innovation. It is destroying the traditional telephone companies and is the reason so many regional power companies are on the rocks

You cannot motivate managers that are not motivated. But business leadership, like leadership of social clubs and other organization, is replenished by FRESH BLOOD.

Now. You take a kid out of college with a degree in business; he's got top marks. Where's he gonna want to go to work? He can work at GM. He can work at any major retailers or other businesses.

Is he going to want to go to a place where they stuff him in a corner with a green eyeshade, and tell him "SHADDAP!" every time he offers a new idea?

No, he is not. So what you wind up with is slow-witted sons of management and people who couldn't find work elsewhere.

Had something like Staggers been in place at the time the PC was created, some very bright minds would have seen revamping the operation as a CHALLENGE - and probably would have gotten in and risen to it. After all, rail service is a necessity - this wasn't like so many consumer products that couldn't cut it on the market. The base market is there today, just as it was in the PC era.

Conrail made money meeting that market; a LOT of money in its last days. The Penn Central could have done the same.

LCJ

Post by LCJ » Mon Sep 05, 2005 11:20 pm

I agree, pretty much.

In fact, some of the people who ended up making the Staggers Act a reality were molded and shaped by the PC failure -- from within PC management ranks.

The Peter Lynch book discussed above tells how there were many within PC who had some ideas that would have made PC the success that Conrail became because of the freedoms later allowed (and having the $$$ available).

Matt Langworthy
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Location: Rochester, NY

Penn Central

Post by Matt Langworthy » Tue Sep 06, 2005 5:43 pm

Noel Weaver wrote:There is another good source of information concerning the Penn Central and that is the book by Peter Lynch simply named "Penn Central Railroad"... I like this book even though I did not like the Penn Central merger, it very accurately relates to what the Penn Central was, what they did and what their operations were like. Fantastic photos too.
I got the book about three weeks ago and I still look at it almost daily. There's alot to learn in there, even after numerous re-reads. Even though I'm very much an EL devotee, there was alot of value in some of those PC lines, especially the Water Level Route. The meger itself was failure, and it took CR to correct some of the damage and a split between CSX and NS to solve the rest.
Matt Langworthy

"It is highly likely that the 1990s were an overrated decade."

calorosome

Post by calorosome » Thu Jan 19, 2006 11:53 pm

I'm reading the Saunders book. Among the great stories of PC dysfunctionality were its yards. The inventory system was broke - boxcars would be lost for days, no one could find them. Perishables perished, causing a lot of lost business to trucks from disgruntled customers. A livestock car full of pigs was left in Syracuse yards for ten days in summer heat with no water or maintenance, they all perished and the stench was horrible.

I think the track question was not the 4' 8-1/2'' gauge. Pennsy was the only line that used 150lb rail. Merging PRR and NYC meant headaches with jointers for the rails. EL had the same problem. LV rails were even worse as far as compatibility by the time of CR, it certainly is a headache today to the IDA that maintains the former Auburn branch out of Owego NY.

Noel Weaver
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Post by Noel Weaver » Fri Jan 20, 2006 2:48 am

This subject has been covered and covered some more, there are more
pages to go back to if you want to read them.
I will only add that White was OK I guess but the management that
deserves the credit for the CTC projects throughout most of the railroad
is the management of Alfred Perlman and I think he deserves the credit
for keeping the New York Central afloat during the 1960's. He may not
have had the nicest personality around but he was a good railroad man
and a good manager. The Central saved huge amounts of money with the
CTC on the main line not only in operating expenses and maintenance but
also property taxes as well.
If the Pennsylvania had management as good as the New York Central
had during the time and if the Penn Central had put more of their resources into the railroad, they could have lasted much longer.
Just one example and that is in telephone systems, the New York Central
and the New Haven had largely automatic dial telephones just about
everywhere on their systems including yards, offices, stations and even
most wayside telephones. The Pennsylvania had some automatic dial
telephone but a good many of their telephones were still the old "crank
and cuss" telephones of many years back, battery operated and rung by
the old magneto boxes. They also had signal towers all over the place,
many of them were operated 24/7 while the New York Central side had
only a few towers left mostly in very congested areas and in the New York
commuter zones. Even today, in January, 2006, there are still a few
signal towers left in the former PRR territory in the north east.
If Perlman had the full run of things, the railroad may have lasted a little
while longer but the long term future called for drastic action and most of
the damage had already been done by the time Conrail came into the
picture.
The merger could have and should have made it but it didn't.
Noel Weaver

mxdata
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Post by mxdata » Sat Jan 21, 2006 6:38 am

From the standpoint of a supplier who did business with many railroads, Penn Central was memorable for its arrogant and myopic upper management, they seemed to have a talent right from the beginning for attracting people at the upper levels that were preoccupied with silly rituals and unnecessary complications. My personal favorite was always the daily shop check, where they would survey all the shops to see what units were tied up for work, and then get on the phone and chew out the local shop manager if he had too many units undergoing repairs. This automatically penalized the shop managers who were trying to improve the equipment availability. The local solution that usually resulted was to string together some of the dead units, put them in back of a couple units that could still run, and send them out on a train to get them off the shop list. Combined with a constant lack of money for equipment maintenance and a run them till they die locomotive maintenance philosophy, it was a prescription for disaster.
"We Repair No Locomotive Before Its Time"

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