Questions about Penn Central.

Hi everyone;

I've recently done some reading about the trials and tribulations of the Penn Central. I've always had a soft-spot for the PC, even though (or probably because) it was ... a considerable number of years ... before my time. A merger of what were at that time, two great American institutions, even the name sounds great, especially when you say it with the strength and emphasis with which it was generally written. "PENN ... CENTRAL." Still think it should have been so much more than what it turned out to be. But it's clear from reading Joseph R Daugen and Peter Binzens book "The Wreck of the Penn Central", plus some online reading, that it never could have been. I know also that there was another book "No Way To Run A Railroad", containing an account from David C. Bevan, chronicling the events from his perspective. I plan to read that at some point, but I would be cognizant of the reality that Mr. Bevan was probably not an impartial witness. Certainly not if the Daughen/Binzen investigation is anything to go by.

But the reading that I have done, has only piqued my curiosity. There are still plenty of gaps in my knowledge, and perhaps others like me who may soon or in the future read this. So I am hoping someone can either answer, or direct me to where I might find answers to, some questions.

• By the time of their bankruptcy, PC was losing $1m a day, which was a staggering sum in 1970. Using gold as a rough metric to measure inflation, that would be like losing about $35m every single day, in todays money. By all accounts, the losses only increased, likely very steeply, because of the losses associated with the regulatory arrangments of the day and the increasing inefficiency of its under-capitalized, old and obsolete plant.
  
  So where did they get the money to lose between June 21st 1970 and the passage of a temporary federal subsidy at the end of 1973? And whatever that source of money was, how could they not use it to rebuild bad track, which is surely a routine fuction of even the most pathetic railroads.
• Again with the financial questions, when the government created Amtrak, the conditions for relief for the private railroads meant they had to give Amtrak passenger coaches (I am sure PC was more than happy to be rid of them), locomotives (they'd have been less happy about that, I'd imagine, but there would also have been some locomotives, like the FL-9s, that would have been best suited to passenger service anyway), the right to acquire or become the operating leaser of any Penn Central tracks (they'd have liked that even less) and finally, cash. All or part of the job of capitalising Amtrak was to fall to the private RRs, requiring the writing of big checks.
  
  Again, where did Penn Central get the cash to do this?
• The Red team Green team nonsense. Daughen and Binzens' book focused primarily on the executive suite intrigue, showing that PC was effectively a tricolor railroad, of 3 distinct groups that hated each others guts. The Pennsy red, the Central green (initially run from New York by Perlman!) and "Bevans Railroad," encompassing whatever the hell David Bevan was doing.
  
  But I've got the sense that the Red team Green team nonsense was not limited to the executive suite, nor to the period of PCs solvent days. I read one comment on Facebook from a man who claims to be a witness to this, he alleged that he saw red-team green team infighting continuing well into the Conrail era! Not having been there, I have no reason to doubt the claim, but I wonder how.
  
  How far down the PC organisation did the meshing of red and green result in the kind of paralysis the gripped Saunders, Perlman and Bevan. All the way to the bottom? Did it get to the point where you had "Green" janitors reporting to "Red" supervisors (or vice versa) and them hating each others guts too? Additionally, with the top 3 gone, and the Binzen/Daughen investigation having claimed that the bankruptcy trustees worked to gain the respect of reds and greens alike, could the rivarly have survived into the bankruptcy era, let alone "well into Conrail?"
• Initial efforts to make the railroad efficient:
  We know that the PRR had basically given up on railroading, they were slow to embrace new thinking (things like piggyback service was a Central idea) and were keen to go conglomerate. The Central, chiefly Perlman, still thought the RR could make money and while the railroad was solvent, and before he was "kicked upstairs" demanded the financial controllers raise large amounts of money for improvements to the railroad. Bevan said "all Perlman wanted to do was build classification yards." But he only got to build one it seems, the 1974 video says that the yard they built in Columbus was "the only one we've built since the merger." Two questions arise:
  1) Did Perlman get money to do anything much for the railroad? Money for track relaying, freight cars, repair shops etc?
  2) In so far as he got money to rebuild fixed plant, did he spend it on the "Central" or were the PCs minimal improvement efforts during solvency spent throughout the PC system in some equitable fashion (need, profit potential etc).
• Milton J. Shapp versus Stuart Saunders.
  On Page 67 of their book, Daughen and Binzen, claim that Stuart Saunders never publocally criticized Milton Shapp (Democrat Pennsylvania politician and opponent of the PC merger) but that his private opinion of the man was "unprintable." Being Irish I read that to mean that it was profane. The thing is, that Daughen/Binzen had little issue with profane language because a few pages later, they quoted - in full - Milton Shapp who was in turn paraphrasing Saunders' view of, quote "the f***ing railroad." Daughen and Binzen had no issue reprinting the f-word in full in that context, so what on Earth could Saunders have said about Shapp that rendered his view "unprintable?"
• A strike in 1973 ...
  I only found out a few weeks ago, that there was a strike on the Penn Central in 1973. I was stunned when I read about it. Now, I know from having read these boards from time to time that organized labour has a lot of support here, so forgive me if I'm stepping on anyone's toes here, but what the heck, in the name of all that is holy, did anyone think they were going to accomplish by organising a strike on what was by that time, by all accounts the Pitiful Central. Drive it into the ground faster? Seriously, what was with that?

Hi Sean,

There are others here who can elaborate much better than myself, but I'll try to help somehow.

After Penn Central entered bankruptcy in 1970, I am believing the Federal Government contributed monies
to help limp Penn Central (and the other bankrupt carriers that eventually made up Conrail in '76) along in the
meantime. Penn Central and the others each had trustees that oversaw operations and finances. Basically, that's
where dollars came from.

I have read "The Wreck of the Penn Central", but have not read "No Way to Run a Railroad". As you mentioned,
the latter is skewed by David Bevan, the scorned former PRR and Penn Central CFO. I would recommend reading
"The Men Who Loved Trains", by Rush Loving, Jr. I learned a bunch from this book and it's a really a great read.

Hope this helps!

Charlie

As to the red-green conflict, I can offer a few examples, admittedly anecdotal:

Among middle and upper management, there was quite a lot of leapfrogging in which a red hat reported to a green hat who reported to a red hat, and so on. If a red hat was told to do something he didn't agree with he might go over the head of his immediate superior to the next higher hat of his own color to get it rescinded, while the same thing might be going on in another area or department, with the colors reversed. There was a lot of feeling on both sides that "we could have made it on our own if we hadn't had to merge with those !@#$%^&*!" Naturally all departments were reorganized, resulting in a merged staff, with greens reporting to reds, and reds to greens. On one occasion a department head received a phone call from his new boss (of the other color) that there was to be a staff meeting in Philadelphia on such-and-such a date. He asked, "who is this?" The reply was "this is John [X], the new Manager [---]." The department head's response was "I report to John [Y]!" He then hung up on his new boss. He took early retirement soon after. I was told of an instance when cars originating at a former PRR station in Indiana were being constantly misrouted. Cars for eastern destinations which had previously been put on the local to Logansport for onward movement were now to be sent to Elkhart for furtherance, but it wasn't happening. An investigator who was sent out there to identify the problem asked the local agent why he was still putting those cars on the local to Logansport instead of sending them to Elkhart. The reply was "I'm not sending any cars to Elkhart! Cars from here go to Logansport!" Once they got to Logansport, of course, they lost a few days being sent where they belonged.

On the other hand, some departments worked quite harmoniously, and I think a lot depended on the personalities involved. In the department I was in the PRR guys and the Central guys had all known each other for years, had the same responsibilities on their respective railroads, and had worked together in various railroad activities; I guess we were lucky to have escaped a lot of the red-green nonsense. A high-ranking VP at the time commented years later that there were good people and bad people on both sides, which of course was the case. I think many individuals were simply too small-minded to understand what had to be done.

There is no question that there was a great difference in the two cultures in style, operations, and even terminology. I kind of suspect that the Central prior to Perlman may have been more like the PRR than it had become by the time of the merger.

I've read that after bankruptcy PC was no longer responsible for per-diem payments for frieght cars on other railroad's property and the like, something that helped bump LV in particular into bankruptcy along with PC. But they also owned 80% or more of the LV's stock, although the LV largely was managed independently.

The answers to, almost, all of your questions and more can be found in Rush Loving's book The Men Who Loved Trains. He takes a look more at the business and corporate culture side of the Penn Central issue.

It's just incredible what was done in order to keep the monster fed with enough cash to move. That said however, most of it was actually just simple revolving lines of credit, which is how many businesses operate their day-to-day. It's important to remember that at the time of the merger, nobody thought the PC would fail. It was iron-clad, gold-plated and as we would say today "too big to fail." Because of this, the PC was thought a safe investment, and nearly everyone was quite willing to lend them substantial amounts of money.

ExCon90 wrote:As to the red-green conflict, I can offer a few examples, admittedly anecdotal:

Among middle and upper management, there was quite a lot of leapfrogging in which a red hat reported to a green hat who reported to a red hat, and so on. If a red hat was told to do something he didn't agree with he might go over the head of his immediate superior to the next higher hat of his own color to get it rescinded, while the same thing might be going on in another area or department, with the colors reversed. There was a lot of feeling on both sides that "we could have made it on our own if we hadn't had to merge with those !@#$%^&*!" Naturally all departments were reorganized, resulting in a merged staff, with greens reporting to reds, and reds to greens. On one occasion a department head received a phone call from his new boss (of the other color) that there was to be a staff meeting in Philadelphia on such-and-such a date. He asked, "who is this?" The reply was "this is John [X], the new Manager [---]." The department head's response was "I report to John [Y]!" He then hung up on his new boss. He took early retirement soon after. I was told of an instance when cars originating at a former PRR station in Indiana were being constantly misrouted. Cars for eastern destinations which had previously been put on the local to Logansport for onward movement were now to be sent to Elkhart for furtherance, but it wasn't happening. An investigator who was sent out there to identify the problem asked the local agent why he was still putting those cars on the local to Logansport instead of sending them to Elkhart. The reply was "I'm not sending any cars to Elkhart! Cars from here go to Logansport!" Once they got to Logansport, of course, they lost a few days being sent where they belonged.

On the other hand, some departments worked quite harmoniously, and I think a lot depended on the personalities involved. In the department I was in the PRR guys and the Central guys had all known each other for years, had the same responsibilities on their respective railroads, and had worked together in various railroad activities; I guess we were lucky to have escaped a lot of the red-green nonsense. A high-ranking VP at the time commented years later that there were good people and bad people on both sides, which of course was the case. I think many individuals were simply too small-minded to understand what had to be done.

There is no question that there was a great difference in the two cultures in style, operations, and even terminology. I kind of suspect that the Central prior to Perlman may have been more like the PRR than it had become by the time of the merger.

Hi ExCon90.

Thanks for this post, it was very helpful, especially the last example. I always thought it was the merged computer system that messed up all the car routings, but I guess that those who were caught up in the red-green infighting were more than capable of helping it out No doubt the guys in Logansport were not happy to have all those extra cars coming their way, as one expects they had problems of their own as part of the PC sytstem.

The incompatibility of the computer systems was certainly the main cause of misrouted cars, but other local situations played their part.

ExCon90 wrote:The incompatibility of the computer systems was certainly the main cause of misrouted cars, but other local situations played their part.

I don't know about "main" part but certainly "a major part". Not trying to split hairs but other factors weighed in a lot too. I believe there was a terrible failure of preparation and planning prior to Day 1. Even though computers were nowhere the factor they are today, it should have been obvious even then that those issues had to be addressed. But planning in other areas fell far short as well. There was NOT a smooth transition, and when problems popped up there was no team nor procedure in place to trouble-shoot.

The stories you may have heard were true - there were large cuts (and reportedly whole trains) of "nobills", cars without proper information to send them to their destination. These at times were merely sent "down the road" to the next yard, which repeated the process. In a few days the same group of cars might show up at the first yard again, having traveled hundreds of miles but still without an idea where they belonged. And nobody seemed to have anticipated such an issue and nobody seemed to have the knowledge, authority or both to step in and handle the matter.

Yes, I should have said major, not main. To me, the most puzzling aspect of what happened was that there was a great deal of preparation and planning (by the "merger teams") before the merger but when the day came it appeared that nothing had been decided or arranged. Based on what actually did happen (and this is just a guess) it may be that all the plans were sent upstairs for approval but no decisions were actually made, nor action taken -- possibly a foreshadowing of the squabbling that took place after the merger.

Second only to the witness accounts of the divided loyalties and other lunacy, the issues with the computers are of particular interest to me, because (modern) computers are my profession and hobby.

The Daughen/Binzen investigation says that the Centrals computer system was able to provide information on demand but could not be expanded to cover the entire PC system. The Pennsys system could but it only provided information in a periodical report. One system used tapes, the other, punch cards :O Crazy stuff. There was politics involved as well, neither side wanted to have the others computer system imposed on them >_<

So, as with everything else, rather than create a new "Black" (Penn Central) system, they tried to create an in-house fusion of (Pennsy) "red" and (Central) "green" and it ended up being a fecal shade of brown.

I still remember in the mid-late 1990s you could take a floppy disc, put it into either a PC (MS-DOS, Windows, or some Unix variant) or a Macintosh, format the floppy, fill it up with text files, spreadsheets, MIDI music, 16 or 256 color picture files, small programs, documents of various formats and so forth.

But if you put the disk you made into another machine of a different system, i.e. from a Windows 3.1/95 machine into a Mac or vice-versa, you would be lucky if it even recognised the disk filing system, let alone anything on it. And all of this is with the same specification of 3.5 floppy disk, same concept of silicon microprocessor, similar hard drive and CD-Rom drive specifications, similar soundcards and display adapter etc.

Even with all of that, thinking of running an organisation with two types of computer in the same organisation would have been deeply questionable as late as the 1990s. In 1968, I don't think they should have tried it at all unless they'd planned and tested the hell out of their proposed solution, even at that it would have taken some very good "Middleware." Problem is, middleware would be practically unheard of until the 1980s.

Incidentally, since I now realise that it wasn't just the computers that fouled things up, I have to ask about the problems with the waybills.

Question: What is a waybill exactly and where is it stored while the car it covers is in transit? It is a sheet of paper, or papers? Is it supposed to be physically carried with the car? In a special place in the car? In the locomotive with other papers?

And how did PC lose so many of them? Since we're proably talking about paper here I'm not sure how it could have been affected by the computer foul-ups, was it more a case of people not co-operating?

At the time we're speaking of, waybills were strictly paper documents. I think the easiest way to explain the waybill is that in railroad practice, which went way back in the 19th century, documents had specific names and terminology which didn't carry over into "normal" businesses. Essentially there were three documents involved:
The Bill of Lading, technically issued by the railroad but actually typed out by the shipper, and signed by the railroad freight agent at origin = Purchase Order.
The Waybill, typed out by the freight agent or his clerk, with exactly the same information as on the Bill of Lading, for internal distribution on the railroad (and connecting lines) = Work Order (telling the production department what to make).
The Freight Bill = Invoice.
(For convenience, railroaders commonly used the word "bill" to denote all three, depending on the other person to determine from the context what kind of bill was meant.)
Waybills traveled with the car, from the time the car was picked up by a local freight at the origin station. They were 8x11" in size, or approximately, with the car number and all information pertaining to the destination and consignee on the left half and everything pertaining to the shipper and origin on the right half. (All information was in exactly the same place on all waybills in the United States, regardless of which railroad originated the shipment.) The bill could then be folded vertically down the middle and placed in a stack with the other waybills, with the left side facing upwards, and the stack secured with a rubber band, the waybills being in the same order in the stack as the cars in the train. When the train arrived at a classification yard, the conductor turned in the whole stack of waybills to a yard clerk, who noted all necessary information and rearranged the waybills into stacks corresponding to the makeup of the train in which they were to be dispatched. This stack would then be handed to the conductor of the outgoing train. It was his responsibility to insure that whenever a car was set out en route the waybill would either be handed over to a clerk at that point or else placed in a box from which the waybill would later be retrieved. (One of the functions of the caboose was to provide the conductor with a desk and a chair to do his paperwork.) You can of course see a myriad of ways in which a waybill would go astray -- imagine setting out the 17 head-end cars at an interchange, and the top 16 waybills -- you end up with one "car no bill" at point A and one "bill no car" at point B. Every yard of any size had a "nobill clerk" whose entire job was to try to find waybill information for cars on hand without one. Nobill cars were not a huge problem overall, but the sheer volume of traffic moving meant that there were still of plenty of cars separated from their waybills.
Today, the shipper's computer transmits all bill-of-lading information directly to the railroad's computer, which disseminates the information wherever needed, and anyone on the railroad can query the computer at any time. The computerization of the various billing functions is one of the principal causes of the reduction in clerical forces on the railroads since the 1960's. (If you've ever seen a movie called "The Apartment," with Jack Lemmon and Fred MacMurray, one of the opening scenes shows a vast office filled with rows and rows of desks with clerks sitting at them. You don't see much of that nowadays, but every railroad in the country had floors of offices like that -- they're all gone now.)

That's an excellent description of a waybill and how it worked.

The opposite of a nobill (car with no paper waybill) was an overbill - the train brought in the piece of paper (waybill) but the car was not there. Set out crippled in route? Left behind at a previous yard? Went out in a different train? Good luck!

NYC used the IBM system, with punchcards to transfer information from the human to the computer. The vast majority of locations could not access the computer directly for an inquiry. You had to call a place that had a customer service center - NY City, Detroit, I think Chicago, and possibly more. After reaching a human by phone, you would give them the car number you needed info on, they would punch it into the computer somehow, and tell you over the phone what they came up with.

The PRR used the Friedan (sp?) system which used rolls of perforated tape or something, I never did fully understand it. The hardware was different, the software was different, and it was an entirely different skill to use one vs. another.

NYC had brand new boxcars sitting in Despatch Shops painted up Penn Central. On Feb 1 the local brought these cars to Rochester to enter service. The computer promptly rejected all attempts to process them - as far as the NYC computer knew at that time, there was no such initial as "PC" and it showed each of those cars as an error.

The Bankruptcy Trustees could decide what old, or even current bills like taxes, to not pay, and thus conserve cash even thought the railroad was still losing enormous sums of money, if you counted all the expenses. They could also sell Trustees' Certificates, to borrow money that had to be repaid before any of the old debts.

The bankruptcy trustees would meet with the judge about what bills to pay or not. Sometimes equipment would be scrapped. Authorization would be needed to retire the equipment, and the funds gained by the sale would also have to be authorized at to what it could be spent on. Sometimes real estate would be sold too. One last point about a reorganization is to get rid of money loosing operations. This is done to help reduce the difference between revenue and the additional amount of money which is owed (debt). The end goal is for revenue to be able to support operations. At least an operating ratio of 1 is required, but having some type of profit is best.

My uncle was a computer science graduate of WPI. He went to work with Digital Equipment Corporation after school. He told me that an early assignment was to develop a car tracking system for PC.