What If The PC Merger Had Been Called Off?

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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v8interceptor
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Re: What If The PC Merger Had Been Called Off?

Post by v8interceptor » Tue Nov 17, 2009 1:02 pm

When I read Rush Loving's excellent account of the origins and creation of Conrail; "The Men Who Loved Trains" I found his account of the Pre-PC merger plans of both PRR and NYC fascinating. Specifically how NYC wanted to merge with C&O and B&O and PRR sought merger with N&W and Wabash. One of his contentions is that these mergers would have created far more successful railroad systems and in fact, would have created a situation in the Northeast akin to what we have now in the post Conrail era with the routes absorbed by NS and CSX respectively..

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Re: What If The PC Merger Had Been Called Off?

Post by Engineer Spike » Mon Mar 15, 2010 12:01 am

I read that book too, along with Wreck of the Penn Central. I think that the NYC was still too much of a white elephant. Even with A. Pearlman's modernization. They had too many passenger obligations for the main thing. Include the extra tax burdon due to large terminals an extra trackage not needed for freight operation. I also think that the NYC might have made it if they had held out for a few more years. By that time Amtrak was formed, and the states and municipalities had subsidized commuter operations. Of the three componants, that would be the most likely to have succeeded.
I agree with Noel's observations about the New Haven. I grew up near New Britain, Conn. Many of the mills closed in the '60s and early '70s. Who knows if my above conditions would have held for them too. Could New Haven restructure as a terminal carrier after Amtrak, ConnDot/MTA, and MBTA came about?
PRR leaves the most questions. They had depended on N&W coal in lean times before. N&W was the management farm team. Who knows how long it would have taken before their arrogant management was weeded out, and Pearlmanesque modernization implemented.
Noel brought up another good point. That was about diverting money to other interests. At that time, the interstate highway was new-the wave of the future. Railroads were considered something pre war, 19th century. They were looking to get out of railroading, and move to the future. Most of the railroads were forming holding companies then. From what I've read, most of PC's outside investments were flops, and shady deals.

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Re: What If The PC Merger Had Been Called Off?

Post by Noel Weaver » Mon Mar 15, 2010 2:08 am

Funny that this topic should wake up again right after I finished reading the Wreck of Penn Central for the umpteenth time.
I am still convinced that if Perlman had a free hand to do what had to be done the merger could have work. They still would
have needed to solve the passenger problem but I think that would eventually have happened. The Central overall was far
better maintained and had less unneeded trackage and facilities, Perlman saw to that, if it was not needed it was torn down
or otherwise removed from the tax rolls.
The New York Central had a very modern signal system and could handle as much traffic on two tracks as the Pennsylvania
would need three and four tracks to do the same job. Interlockings on the New York Central were controlled from the train
dispatcher's office while the Pennsylvania still had signal towers all over the place and most of them were still manned 24/7.
The New York Central had mostly a very modern telephone system which allowed for every staffed location to reach every
other staffed location directly using an in house direct dial system while Pennsylvania had a little bit of this but a lot of
their communication was still handled the old fashioned way with crank and cuss phones.
The Central had a very heavy commuter operation but their intermediate and long haul trains were somewhat less than what
was operating on the PRR and it fitted its territory far better than the PRR's did.
In closing Perlman was a far better railroader than that gang from the PRR and he had good people under him too.
Perlman did not end his career when he got shafted by Saunders but went on to lead the Western Pacific and by all accounts
he did a good job there too and kept it ready for the Union Pacific to eventually take over. I think the Central could have
made it on its own but I do not think the Pennsylvania could have and neither could the New Haven which was a basket case
due to eventual loss of nearly all of the heavy freight business in southern New England.
Noel Weaver

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Re: What If The PC Merger Had Been Called Off?

Post by Rick Abramson » Fri Mar 19, 2010 12:51 pm

According to the book, Wreck of the Penn Central, the PRR basically took over the NYC to keep themselves afloat. The PRR by 1960, like the NH was on the verge of bankruptcy. Al Perlman was the better compared to Stuart T. Saunders. After PC went bankrupt, and many of the money "manipulations" practiced by Saunders and Bevan surfaced, Saunders was disbarred by the Commonwealth of PA.
As far as not wanting the NH, one cannot blame PC for that. The government mandated that a condition of the NYC+PRR merger was the takeover of the NH. Who in their right mind starting a new business would want a bankrupt one thrown in at the new businesses expense? I wouldn't!
The NYC by the mid-50s was far more progressive than the PRR. Yet, in the early 50s, the NYC itself was on the verge of bankruptcy! Then there was Robert R. Young.
Personally, I find the whole NYC-PRR debacle most interesting. Perhaps in retrospect, the NYC should have merged with C&O and the PRR with N&W.
The PC merger merely duplicated already duplicate routes!

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Re: What If The PC Merger Had Been Called Off?

Post by goodnightjohnwayne » Fri Mar 19, 2010 4:05 pm

Noel Weaver wrote:Funny that this topic should wake up again right after I finished reading the Wreck of Penn Central for the umpteenth time.
I am still convinced that if Perlman had a free hand to do what had to be done the merger could have work. They still would
have needed to solve the passenger problem but I think that would eventually have happened. The Central overall was far
better maintained and had less unneeded trackage and facilities, Perlman saw to that, if it was not needed it was torn down
or otherwise removed from the tax rolls.
The New York Central had a very modern signal system and could handle as much traffic on two tracks as the Pennsylvania
would need three and four tracks to do the same job. Interlockings on the New York Central were controlled from the train
dispatcher's office while the Pennsylvania still had signal towers all over the place and most of them were still manned 24/7.
The New York Central had mostly a very modern telephone system which allowed for every staffed location to reach every
other staffed location directly using an in house direct dial system while Pennsylvania had a little bit of this but a lot of
their communication was still handled the old fashioned way with crank and cuss phones.
The Central had a very heavy commuter operation but their intermediate and long haul trains were somewhat less than what
was operating on the PRR and it fitted its territory far better than the PRR's did.
In closing Perlman was a far better railroader than that gang from the PRR and he had good people under him too.
Perlman did not end his career when he got shafted by Saunders but went on to lead the Western Pacific and by all accounts
he did a good job there too and kept it ready for the Union Pacific to eventually take over. I think the Central could have
made it on its own but I do not think the Pennsylvania could have and neither could the New Haven which was a basket case
due to eventual loss of nearly all of the heavy freight business in southern New England.
Noel Weaver
I'm inclined to say that Perlman was a very diligent railroader, but he was he did have a number of failings as a modern executive. For instance, I question whether he had a minimal understanding of the incompatibility between the computer systems as the NYC and PRR. Considering that the regulatory delay gave management 5 years to figure out how to combine operations, it is inexcusable that the computer issue wasn't addressed before it created a systemwide disaster. I also question whether Perlman had the financial acumen to fully appreciate the position of the former PRR, even after the merger. There undoubtedly was a level of deception on the part of the CFO, but I still find it hard to believe that Perlman was so entirely ignorant of the perilous financial position of the company?

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Re: What If The PC Merger Had Been Called Off?

Post by Tadman » Tue Apr 27, 2010 3:52 pm

The computer issue is a good question. I wonder if anybody other than MIT braintrusts had any concept of computer compatibility in the late 1960's?

On the other hand, PC was the textbook merger case that demonstrated it takes 3-6 years to successfully integrate two large railroads. Look at CSX, NS, and BNSF. Some things were integrated immediately, some things too three years, and some things took 6 years. I think PC was under the impression that if they started operating as one road immediately, the cost savings would materialize immediately, ergo the immediate unification.
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Re: What If The PC Merger Had Been Called Off?

Post by Matt Langworthy » Thu Apr 29, 2010 6:25 pm

I figure Perlman probably had some idea of the PRR's poor financial shape pre-merger, although exactly how much he knew is hard to tell. Regardless, I'm guessing Perlman thought he could resolve the PRR's problems... just as he had made significant improvements to the NYC in the late '50s. As others have noted, Perlman's success with the WP clearly demonstrates the man was no fluke. His accolades are deserved.
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GulfRail
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Re: What If The PC Merger Had Been Called Off?

Post by GulfRail » Mon May 03, 2010 3:17 am

I thought of something that might be interesting...what if the NYC had merged with the P&LE instead? The "Little Giant" was an NYC vassal that could have easily have been merged into the Central. P&LE-NYC was an ideal merger! The two were already integrated (to an extent), and thus the ICC probably would have allowed for the merger to take place (it would be considered "a streamlining of corporate structure"). Of interesting note, in 1967 the 209 mile P&LE a had net income of roughly $10 million dollars, whereas the 9,538 mile Pennsylvania had a net income of only $9 million.

Then there's Amtrak. According to the 1966 annual report (the last before the PC merger), the NYC lost $16 million dollars on passenger service. Amtrak was on the drawing boards at the time (Amtrak was NOT caused by Penn Central, but rather by pleas from railroads for federal funding of money-losing passenger trains), and once it was formed in 1971, the NYC would have a net income of $33 million a year. While not astounding, the Central would have been the strongest of the eastern railroads, and it would have been able to make it to deregulation. Deregulation also was NOT caused by Penn Central/Conrail, but by the Rock Island's liquidation and fears of nationalization. (I've read numerous articles on why they passed deregulation, and one congressman said something to the effect of "We don't want another Rock Island.")

Now, the Pennsylvania...this might take awhile. The real trouble began with Saunders. First of all, he was elected in an attempt to make peace with Perlman. Howard Butcher III thought that he would get along well with a Al, but there were several problems. Al was an operations man, while Stuart was a finance man. This is never a good combination. Operations men realize that capital investment is what's needed for healthy returns in the long run, but finance men tend to only think in the short term. Saunders was no exception. Instead of trying to rationalize the Pennsy, he diversified. The reason for this was that the PRR was being forced to divest itself of the 3 million shares of the N&W that they owned because of the Penn Central merger, and the Pennsy would need a new wellspring to replenish itself. Each year, the Pennsy would receive $24 million dollars in dividends from these shares, and it basically served as the lifeline for the company. I will give Saunder's kudos on one of his investments: Buckeye Pipeline. Buckeye was an excellent investment. In 1970, it produced roughly $36 million dollars in dividends, all for the Pennsylvania Company/Penn Central. Madison Square Garden and the "Air Rights" deals were also good. If only the same could be said about his other purchases. Executive Jet, Arvida, Macco, Great Southwest. What do these all have in common? Real-Estate and Transportation require large amounts of capital! If you have two transportation subsidiaries and three real estate subsidiaries, one of them is going to suffer from malnutrition.

A better choice for the Pennsy would have been the Wabash's Herman H. Pevler. Who was Pevler? Pevler was pretty much the Pennsy's version of Perlman. Described as "a driver who operated with doors open and coats off," citing the "sheer force of his personality" and vigor in his activities, Pevler was a true operations man. While disliked at the N&W, Pevler was quite a good manager. Wisconsin Central's Ed Burkhardt recalls the time that Pevler visited the Wabash's hump yard in Decatur and was told that the yard was perfect. He chuckled and told his traveling associates "Pull the pin. I'm going to stay here for a couple of days to observe this perfect yard." Both Pevler and Perlman were former "gandy dancers," and Pevler even became a division superintendent on the PRR. Certainly, Pevler would have been approved by the mainliners, as he was a "proper" Pennsy-man. But when Pevler got to Philadelphia, he would have immediately re-appraised the PC merger, and would have come to the same conclusion as Perlman: BAD IDEA. Pevler would have still acquired Buckeye for $84 million, but the remaining $116 million that was used for diversification in "our timeline" would have been plowed back into the railroad, upgrading yards and adding CTC. The dividends from the N&W and Buckeye also would have been invested into rehabbing the Pennsy, and Pevler would have done several things that Saunders didn't:

1.The Pennsy received permission numerous times to discontinue passenger trains, but Saunders wouldn't allow it in order to garner political support for the Penn Central merger. Pevler slashed the N&W's passenger service with unrelenting zeal, so I can see that he would have had no problem with doing the same at the Pennsy.
2.The Pennsy also received permission to drop unneeded brakemen. But Saunders decided to keep the men on the payroll and provide any workers that were laid-off with hefty severance packages. If Pevler had gotten permission to drop the firemen, he would have dropped them immediately.
3. He would have sold the DT&I to the N&W. Why? The DT&I was barely making any money (around $1.8 million a year), and it wasn't paying dividends. The N&W had always had an odd fixation with its cousin (both were Pennco Properties), and even offered to pay $25 million for it. Had Pevler sold it for that price, but asked that the N&W paid for it in stock, the PRR's dividends from the N&W would have swelled to $28.5 million dollars a year, and its ownership would have increased to 3.3 million shares. The Pennsy would get $2.6 million dollars a year in dividends (from the 260,000 shares of the N&W added because of the DT&I deal) from the sale of a property that had a net income of $2 million dollars in the best of times.

When Amtrak would came around, the Pennsy would have been relieved of its intercity passenger trains, and thanks to the savings (assuming that the Pennsy had been able to cut passenger trains to the same level as the NYC did), the Pennsy's net income would be around $35 million. This, combined with the stream of dividends from Buckeye and the N&W (roughly $64.5 million!) would have allowed for the "Standard Railroad of the World" to stay afloat.

What about the other railroads that made up Conrail? Here's where it gets interesting.
Without Penn Central, the New Haven would have been a junkie living on state and government subsidies. That is, until Amtrak comes. With renewed zeal, the New Haven trims its branches, rebuilds its equipment and mainlines and makes deals with the MBTA, ala. the Boston & Maine. After emerging from bankruptcy in 1980, Guilford Transportation Industries acquires the New Haven for $23 million. (Hmm...Pan Am GP40-2L's on Hells Gate bridge? Sounds good to me. :wink:)

The Reading and Jersey Central would have been forced into liquidation. 259-miles of the Reading would have ended up going to the B&O in 1972 (as Conrail wouldn't exist, they would have no other choice). The Jersey Central's routes West of Jersey City would have been abandoned, while the remaining Jersey City-Bridgeton line would be split. South of Winslow Junction, the PRSL would take over, while the Winslow Junction-Jersey City route would be purchased by the State of New Jersey. As a condition of the formation of the Chessie System and also the Reading acquisition, perhaps the NYC would have purchased the B&O's interest in the Monongahela.

The Erie Lackawanna would have still declared bankruptcy, and the Pennsylvania and New York Central would "generously" offer to provide service over the remnants of their fallen competitor. The two railroads would split up the EL at Youngstown, with everything east of there going to the Pennsy, and everything west going to the Central. The Youngstown-Marion line would make an ideal extension for the "big four," while the Southern Tier would have put the Pennsylvania on par with the NYC. Perhaps the Marion-Chicago line would have remained in operation as a sort of "release-valve" for the Water Level route, and also so that the NYC could compete with the Pennsy in the Lima-Huntington/Fort Wayne-Chicago corridor. The NYC would expect some concessions from the Pennsy, namely the sale of the remaining third of the Monongahela that it didn't control. The Lehigh Valley would have been sold to Grand Trunk Corp. in the late '70's, ala. the DT&I. As for the "unsaved" Western Pacific, Western Pacific Industries would have sold the assets of the WP to the Union Pacific in early 1979.

This is what this alternate Northeast would have looked like on the eve of Deregulation:

Chessie System (C&O-B&O-WM-259 Miles of RDG):11,558 Miles
New York Central System (NYC-P&LE-IHB-MGA-536 Miles of EL):10,838 Miles
Pennsylvania Railroad (PRR-1086 Miles of EL):10,624 Miles
Norfolk & Western Railway (N&W-DT&I-IT):8,391 Miles
Pennsylvana-Reading Seashore Lines (Joint PRR/Chessie):357 Miles

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Re: What If The PC Merger Had Been Called Off?

Post by Franklin Gowen » Sat May 08, 2010 2:45 pm

GulfRail, that is a fascinating ahistorical "what if?" scenario! Thank you for putting so much effort into your research and sharing the fruits of it with us. NYC+P&LE, which sounded rather strange and even silly to me at first, would actually have been a damn good idea. Likewise for placing Pevler in the halls of power in Philadelphia. It has always been difficult for me to think of the duo of Saunders+Perlman without cringing...what a mis-alliance of mutually alien mindsets.

As a former "cut-me-and-i-bleed-Tuscan-Red" fan, I must admit that the Pennsy was already locked into a process of slow liquidation after the 1957-58 recession. Even with the N&W stock income, it was cannibalizing itself merely to keep its nostrils above high tide...never mind actually having enough cash to reinvest in the property or issuing an attractive dividend w/o robbing Peter to pay Paul. The belated awareness on the part of PRR leadership that things were much more badly amiss than their egos previously allowed them to see...ugh. That silent but slowly-rising unease forced them to consider some hasty and ill-advised courses to action. I wish that cooler heads had saved the day, as your above scenario so ably detailed. The merger with NYC was one of the worst things that they could have done, especially as their pre-merger planning was pretty slipshod by modern standards (e.g., the computer incompatibility). They should have also at least considered the nontrivial chance that if they did pull off Penn Central, New Haven might (by dint of total desperation) find a way to join their party.

Given my major interest, this gem caught my eye:
GulfRail wrote: The Reading and Jersey Central would have been forced into liquidation. 259-miles of the Reading would have ended up going to the B&O in 1972 (as Conrail wouldn't exist, they would have no other choice).
Precisely which Reading mileage are you referring to?
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Re: What If The PC Merger Had Been Called Off?

Post by M&Eman » Sat May 08, 2010 4:32 pm

How does the Lehigh Valley play into all of this? And would the Jersey Central mainline still survive within the context of commuter service? And what would have PRR done with the New Jersey Cutoff/Lackawanna main? Would you also tell me why you think P-RSL would have survived as an independent agency and not have folded into the Chessie or Pennsy? I'm not questioning the viability of your scenario, I'm just curious for more details. I find your scenario very interesting.
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Re: What If The PC Merger Had Been Called Off?

Post by GulfRail » Sun May 09, 2010 5:52 pm

M&E, Franklin, I'm glad to see that you liked my scenario! :) And yes, I'm more than willing to answer your questions...

1. Ah yes, the Lehigh. The biggest cause for the LV's bankruptcy was the inability of the Penn Central to pay demurrage charges to the "Valley." With the Pennsylvania doing better under Pevler, the LV would have struggled along for several more years until a suitor showed up. Some possibilities are the N&W, or even *shudder* Guilford. :wink: One other idea I had is that the Lehigh would be granted trackage rights on the NEC from Philadelphia to Alexandria (ala. the D&H), thereby compensating for the lack of friendly connections at Philadelphia. This would allow for the LV to interchange with the Southern and Seaboard, and also compete for Canadian traffic bound for the south (and vice-versa).
2. The Lackawanna cutoff would have survived as a freight route. After all, the Pennsy was no stranger to cutoffs and steep grades (horseshoe curve, for example).
3. The PRSL would have remained as a jointly owned property, with the Baltimore & Ohio taking over the Reading's share.

I've further refined my scenario, and I've also reconsidered how the "bankrupts" (those being the Reading Company, the Central Railroad of New Jersey and the Erie Lackawanna) would have been split up. Here's how they were carved up under the "Northeast Rail Preservation Act" of 1974 (NERPA)...

Reading Company:
Harrisburg-Reading-Philadelphia (PRR)
Reading-Allentown (PRR)
Reading-Wilmington (PRR)
Bethlehem-Philadelphia (LV)
Philadelphia-Jersey City (Chessie/B&O)
Shippensburg-Harrisburg (Chessie/WM)
Gettysburg-Carlisle Junction (Chessie/B&O)

Central Railroad of New Jersey:
Allentown-Scranton (LV)
Allentown-Phillipsburg (PRR)
Winslow Junction-Bridgeton (PRSL)
Wislow Junction-Perth Amboy (NJDOT)

Erie Lackawanna:
New York-Scranton-Binghamton (PRR)
Binghamton-Utica (PRR)
Binghamton-Syracuse-Oswego (PRR)
New York-Binghamton (PRR)
Binghamton-Buffalo (PRR)
Hornell-Greenville (PRR)
Sharon-New Castle (NYC)
Girard-Marion (NYC)
Marion-Huntington (N&W)

Another factor I forgot to consider was the Ann Arbor. The DT&I controlled the deficit ridden Ann Arbor, and certainly the N&W would have wanted no part in the AA. I have it that the AA was held in a separate trust, and when it went bankrupt in 1974, the N&W took the assets it wanted (namely their newest locomotives and rolling stock and the line from Ann Arbor to Toledo), and sold the remainder to the State of Michigan. The Pennsylvania would have sold the Northeast Corridor from New York to Washington (as well as the Philadelphia-Harrisburg tributary) to Amtrak (for $61.5 Million). This would allow them to pay for the $49.1 Million acquisition of Erie Lackawanna and Reading track, as well as to allow for the Pennsy to dispose of its remaining commuter service. The New York Central would have inherited 1/3rd of the Monongahela from the Pittsburgh & Lake Erie, and would have picked up the B&O's third as a condition of Chessie entering Gotham. The Pennsylvania would have then sold their third to the New York Central in order to pay for the rehabilitation of the Reading and Erie Lackawanna (that and they didn't want to be the partial owner of the Monongahela unless they owned the bigger share). The Central would now own the seventh largest coal hauler in the nation, further boosting its revenues. The NYC also would have sold its branch from Pittsfield to North Adams to the Boston & Maine in the late 70's. Here's an (edited) list of the northeasts railroads on the eve of deregulation:

Chessie System (+160-Miles of RDG): 11,391-Miles
Pennsylvania Railroad (+1250-Miles of EL, 202-Miles of RDG and 20-Miles of CNJ): 10,684-Miles
New York Central System (+P&LE, IHB, MGA and 165-Miles of EL): 10,489-Miles
Norfolk & Western (+DT&I, IT, 126-Miles of EL and 28-Miles AA): 8,968-Miles

(Guilford: 5,457-Miles)
Boston & Maine: 1,274-Miles
New York, New Haven & Hartford: 1,207-Miles
Maine Central Railroad: 1,052-Miles
Lehigh Valley (+56-Miles RDG and 143-Miles of Trackage Rights on the NEC): 1,187-Miles
Delaware & Hudson: 737-Miles
Last edited by GulfRail on Mon May 10, 2010 2:27 pm, edited 5 times in total.

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Re: What If The PC Merger Had Been Called Off?

Post by Allen Hazen » Sun May 09, 2010 6:22 pm

Very interesting "alternative history" speculation, GulfRail! I have some questions, though.
(I'll say something about my groundrules for alternative histories at the bottom of this.)

Biggest one: it might have taken greater insight than even Perlman's to foresee it in the 1960s, but P&LE was maybe not as good a partner as you think. The Pittsburgh steel industry was on the way out, and P&LE was dependent on that source of heavy traffic. (When I moved to Pittsburgh in 1969, there was only one steel mill -- J&L -- in the city limits. Now there are none.) P&LE's subsequent history in @ (the actual world) was pretty ugly: initial optimism after Conrail was organized, and modest expansion (by taking on at least trackage rights beyond the end of its own track) followed by decline into (I think) bankruptcy, sale of its main line, dissolution as a corporation (with acrimony about labor protection), takeover (with "insulating" corporate structure) by CSX...

With 22-20 hindsight, perhpa what Perlman SHOULD have done was dis-invest in the P&LE and put the proceeds into upgrading the Kankakee Belt: with a line avoiding Chicago allowing a direct connection between the NYC main east and the Santa Fe main to the southwest, NYC would have had a head start on the later intermodal boom. And perhaps found that its naturalo merger partner was ATSF!

--

Philosophers have given thought to what is involved in reasoning productively about counterfactual situations: an important advance was the American philosopher (and railfan) David Lewis's "Counterfactuals," published a few years after the Penn Central bankruptcy. (He introduced the notation @ for the real world.) Most important thing: to keep the speculation disciplined, assume that the rest of the world, in your imagined alternative history, is as much like the real world as is consistent with your explicit hypothetical supposition. So, for example, in asking "What if New York Central had merged P&LE while avoiding the Penn Central merger?" look at the actual history of the American steel industry.

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Re: What If The PC Merger Had Been Called Off?

Post by GulfRail » Mon May 10, 2010 12:14 am

Good point about the steel industry and the P&LE, Allen, but another reason that the Central would have taken over the P&LE would have been for an eventual takeover of the Monongahela. Perlman believed that the Pennsy and Central would need access to the coalfields of West Virginia to survive. The Central already had access to Charleston via. the old Toledo & Ohio Central, but gaining access to the Monongahela's rich seams of coal would further secure the finances of the company. Initially the reason the P&LE would be acquired was for it's steel and industrial traffic (the decline of the P&LE didn't really become evident until the early-1980's), with coal being a secondary reason.

Following the energy crisis, Mike Flannery decided that the NYC needed to gain control of the Monongahela's extensive reserves of utility-grade coal. Sitting down with Richard D. Spence (Pennsylvania Railroad) and Hays T. Watkins (Chessie System), Flannery agreed not to oppose the Pennsy or the Chessie's plans to acquire trackage in NYC territory, provided that the two railroads surrendered their interests in the Monongahela. Chessie was already the nations 2nd biggest coal hauler by virtue of the C&O, B&O and WM's tributaries into the mountains of West Virginia, so divesting itself of the Monongahela wouldn't have been much of a sacrifice (the B&O even had its own Connellsville-Fairmont route parallel to the MGA). The Pennsylvania, on the other hand, would have been more reluctant. But Spence, realizing that the Pennsy was going to need cash to acquire and rehabilitate the former Erie Lackawanna and Reading, would have sold the Pennsy's share for $20 Million.

The P&LE would have fared much better in this scenario than it did in our timeline, by virtue of being absorbed into a larger system with longer-hauls before the steel industry collapsed. Also, the P&LE's $10 million dollar net income, when combined with the Central's $7 million ($23 million following the creation of Amtrak), would have been ideal for investing in the Kankakee Belt. I also decided that the Indiana Harbor Belt was absorbed into the Central in 1971, as a result of the NYC making an offer to the cash-starved Milwaukee Road (the MILW owned the other 40% of the IHB), so the NYC would be able to bypass Chicago using the IHB.


As for the executives, I've been doing some thinking on this one...

Pennsylvania Railroad:
Herman H. Pevler (President, 1963-1970. Chairman, 1970-1973.)
William H. Moore (President, 1970-1973. President/Chairman, 1973-1975. Chairman 1975-)
Richard D. Spence (President, 1975-)

New York Central System:
Alfred E. Perlman (President, 1956-1958. President/Chairman, 1958-1973. Chairman 1973-)
Mike Flannery (President, 1973-)

Norfolk & Western:
Stuart T. Saunders (President, 1959-1970. Chairman, 1970-1973)
Jack Fishwick (President, 1970-1973. President/Chairman, 1973-1978. Chairman, 1973-)
Robert Claytor (President, 1978-)


My Explanations:

1. Saunders, as Pevler would have been the one running the show at the Pennsylvania, would have remained in charge of the N&W until his "sweetheart deals" and less than pristine management practice would have gotten him in hot water. In 1970, Fishwick would lead a coup against Saunders, who would be shunted off to the position of Chairman until his retirement in 1973.

2. When Howard Butcher III went searching for a new President that would get along better with Perlman, Bevan stated that unless the new President was from the Pennsy, he would quit. Instead of ignoring Bevan's threat (like he did in our timeline), Butcher took it seriously, and decided against Saunders. In order to find a "socially acceptable" President, they turned to the Wabash, a Pennsy Subsidiary. The "main-liners" soon settled upon Herman H. Pevler, a veteran of the Pennsylvania Railroad. He had been a "gandy-dancer" before moving to the engineering department, and he had even been on the Pennsylvania's board as Vice-President until 1959, when he was appointed President of the Wabash. This satisfied Bevan's desire for a "Pennsy-Man," while (unintentionally) giving the Pennsy the leadership it needed.

3. Moore would have been ideal to succeed Pevler as President of the Pennsylvania following his decision to become Chairman of the Pennsy. Moore was actually President of Penn Central, and like Pevler, he was an operations man. But he was abrasive and disliked by even Pennsy men, so he would have been shunted off to the position of Chairman in 1975.

4. Spence is an interesting one. Spence actually was Conrail's first President, and served as the Southern Pacific's Vice President-Operations from 1969 until he was appointed to his post at Conrail on October 15th, 1975. Spence would have continued the operations-oriented precedent that Pevler established, and since he actually served as President of Conrail, it seems plausible enough.

5. When Perlman was made President of the Western Pacific in 1970, he brought Flannery with him. Perlman continued as President until 1973, when he was given the position of Chairman. That same year, Flannery became the President of the Western Pacific. My assumption is that Perlman, who was both President and Chairman of the NYC following Young's suicide, would have "passed the presidential torch" to Flannery in 1973, the same time he did at the Western Pacific.

Allen Hazen
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Location: Edmonton, Canada (formerly Melbourne, Australia)

Re: What If The PC Merger Had Been Called Off?

Post by Allen Hazen » Wed May 26, 2010 11:46 pm

GulfRail--
Interesting.
Your justifications for sequence of executives is the sort of thing that the most plausible alternative history writers think through: suppose Perlman had been able to stay at NYC (to take #5 as example)... and then try to keep things as much like the actual world as that supposition allows.

Matt Langworthy
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Location: Rochester, NY

Re: What If The PC Merger Had Been Called Off?

Post by Matt Langworthy » Thu Jun 03, 2010 7:09 pm

i have to say that GulfRail has made alot of interesting and intelligent points. However, I do no believe that EL would have been carved up by NYC and PRR if the PC merger had been cancelled. Why? The reason is twofold.

The first reason is NH. Keep in mind, PC diverted most of the NH traffic to the Water Level Route as quickly as possible from 1969 onward. EL was profitable in 1968 and 1969. If the NH bridge traffic had remained on EL, the railroad would have retained alot of revenue.

Similarly, the bankruptcies of PC and LV in 1970 had a strongly negative effect on EL's income. Prior to the bankruptcy, reciprocal switching charges between EL and PC were effectively neutral. IOW, if the two RRs swapped an equal number of freight cars at an interchange point (e.g. Gang Mills, Buffalo, etc.) the switching charges effectively cancclled each other out. However, this changed under the first two years of the PC bankruptcy. EL had to pay swtiching charges to PC but the latter paid no switching charges to EL, because of bankruptcy protection. Given the amount of traffic they interchanged, there was alot of cash flowing from EL to PC from June of 1970 to June of 1972. PC also benefitted from its earlier bankruptcy by getting a head start on EL for federal bailout money to purchase locmotives and maintain track.

Therefore, no Penn Central would have meant a healthier Erie Lackawanna. EL would have been in better shape to survive Agnes in '72 and would've presented a stronger merger partner for ATSF in 1974 than it actually was in the real world. On top of that, EL was less hidebound than either NYC or PRR. As Erie/EL pundit Bill Burt has noted, EL would have been the first RR in the East to run stack trains... owing, in part, to clearances which it had and competitors (including NYC and PRR) lacked... as well as a spirit of innovation. IMO, it is probable that EL would have entered the post-Staggers Act era as a healthier operation than PRR and might even have given NYC a run for its money.. and I highly doubt EL woulf have fallen into the orbit of either NYC or PRR.
Matt Langworthy

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

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