Why did the PC merger fail?

CPF363 wrote:I appreciate your comments. However, I am under the impression that the PRR did not need to do the merger with the NYC in the first place. The expensive conditions placed upon the merger, most especially the divestiture of their N&W stock, were not worth it in the end. Instead, the PRR should have invested and modernized in its own core east-west railroad and spun off north-south lines in the Midwest to the Southern and L&N railroads (didn't the Southern want to purchase the DT&I at one time?) and worked an arrangement with Amtrak, the U.S. Government and the ICC for their purchase and operation of the Northeast Corridor and Keystone electrified lines in exchange for getting control and rebuilding the Reading Railroad during their bankruptcy in 1971. If they made it to the 1980s with good management in place, they could have petitioned the ICC for a PRR-N&W-Wabash merger which would have resulted in essentially what we now have in the Northeast with Norfolk Southern's network without a Penn Central bankruptcy, creation of and subsequent breakup of Conrail.

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

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

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

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

http://timesmachine.nytimes.com/timesma ... geNumber=1" onclick="window.open(this.href);return false;

Freebie:

https://news.google.com/newspapers?nid= ... 9592&hl=en" onclick="window.open(this.href);return false;

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

Bevan and Saunders had no interest in improving the railroad--- it's quite apparent that they would rather have dumped the railroad assets of the Pennsylvania Company and concentrated on more "modern" investments, like amusement parks and executive jets.

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

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

Matt Langworthy wrote:Several other magazines discussed the 40th anniversary of Conrail's formation in their spring issue. According to the CR article in Trains, a very damning piece of evidence against Penn Central was withheld from the public that explained the reluctance of Congress to act in 1970. The Congressional committee had gotten photos of Saunders' underlings with naked stewardesses on a PC corporate jet. The feds' decision to not bail out PC was a no-brainer. It really shows just how corrupt Penn Central's upper management had become. They really thought they could do anything.

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

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

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

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

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

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

FEBRUARY 1st, 1968 FIFTY YEARS AGO TODAY the Pennsylvania and the New York Central merged. I was working for the New Haven Railroad at that time and we knew that eventually we also would be a part of the merged system. When it happen with us was a bit later but most of us were hoping for a lot of improvements in the operation, equipment and working conditions. For the most part this did not happen. The PRR people came to New Haven and other points like "gangbusters" are your timetables up to date?, why didn't you cuff your pants?, what is the safety rule of the day? and a lot more BS. The engines were falling apart, and things were pretty bad, we had gone through a lot over the past few years. Many job cuts occurred and some trains came off but this was to be expected. Having said that, the merger opened up a lot of opportunities for those of us who still wanted to work. I remember my first time on a GP-40, wow what an engine, later on I learned that GP-40's were very good engines but they could be a bit slippery at times and their dynamic brake was not quite as effective as I thought it should be. We lost Bay Ridge the first month, the Virginian motors the first month (they went to the Penn where they were put to good use), and there were other changes that slip my mind right now. But we still were hoping for the better. The way I look at it now Penn Central was the stepping stone for a lot of better things. E-8's replaced FL-9 on the New Haven - Boston passenger trains and that was a huge improvement, more power, better riding and much better performance. The GG-1's took over New Haven - Penn Station jobs and again an improvement over the Jets and FL-9's, yes the GG-1 had terrible seats, were hot in the summer and cold in the winter but they rode very well, gave us very little trouble on the road and they were electric locomotives and that was what should be operating between New Haven and New York. MU cars that were just sitting around between AM and PM rush hours were put to work running most off peak trains between Grand Central Terminal and New Haven and they were an improvement over the FL-9's. My work opportunities increased as well, I qualified between Devon and Beacn (I never finished qualifying on the Hudson to Selkirk) and covererd the LI jobs between Oak Point and Selkirk a lot, they were good jobs and I liked working them. A bit later when things were somewhat slow on the spare board at Oak Point I qualified on the River Line where I could hold regular road freight jobs. Eventually the BS cooled off as management finally realized that we were all in it together and nothing would be gained for them by riding shotgun over the troops. There was a lot less BS on the Central side than on the Penn side and the New Haven side, the New Haven ended up with a couple of foul balls off the PRR but eventually the foul balls left the ball park. Every company I worked for whether it was the New Haven, Penn Central, Conrail or Metro-North, I considered myself lucky working for them all. PENN CENTRAL - FIFTY YEARS AGO TODAY!!!!
Noel Weaver

Great stuff as always, Noel!

Charlie

Some time in the spring of 1969 -- so, a few weeks after the PC takeover of the NH -- I was walking along the right of way of the New Haven main line a few miles west of the New Haven passenger station, and I met the crew of (what I now suppose to be) a way freight. (This was before I became a serious rail enthusiast, and I suppose I didn't notice lots of things I would have noticed later: I think they were operating an S2/S4 switcher, and had stopped for some reason: I don't know what.) I chatted with them, probably asked what they thought of the merger, and was told that the New York Central managers they had dealt with were "real gentlemen," but the Pennsylvania men were not-- the PRR men were foul-mouthed and profane.
Not, I suppose, a very significant recollection. I'm glad people who really knew something -- like Noel -- post to this board!

Well, just by looking at the system maps, aside from lines going in/out of NYC and Chicago, there wasn't a lot of duplicated lines. since both railroads were about to collapse, there were few lines to trim, like Erie/DL&W were able to do. In the end, both railroads probably would've gone bankrupt within a few months of each other if they had not merged.

The PRR and NYC lines to St. Louis were more or less parallel, and neither had much on-line traffic. I have been told (but this may just have been malicious gossip) that PC's decision was to concentrate freight and maintenance on one of the lines… and the Amtrak "National Limited" on the other.

Given its post-PC history, the Fort Wayne (the PRR Chicago line, still in the late 20th C referred to by the name of the long-since absorbed PRR predecessor company) was largely redundant: westbound traffic out of Pittsburgh could be run up to a connection with the NYC ("Lakeshore") line without much of a mileage penalty, and the ex-PRR line reduced to an unsignalled single track for a bit of local business.

After the New Haven takeover, PC had two lines into Boston: the ex-NYC B&A and the New Haven's Shore Line. PC did its best to concentrate freight on the B&A: had PC lasted longer, they might have been able to do what CR did: give away the redundant line to Amtrak.

So at least some trimming of approximately duplicated lines was possible. And attempted/accomplished by PC and/or its successors.

They also had to deal with the ICC. Just think what could of happened if the Staggers Act had come about shortly after PC's birth. They may have made it. It sure helped Conrail turn the corner.

J. Lang

Unfortunately the Staggers Act could not have been passed (and possibly not even introduced) without the spectacular failure of PC to jolt Congress into a realization of what was happening in the real world, as well as the efforts of the highly respected L. Stanley Crane, which convinced them that yes, we really have to do this.

Conrail wasn't everybody's first choice. There was some sentiment in favour of maintaining RAIL competition in the Northeast. One idea was to have Penn Central and a rival cobbled together out of all the smaller bankrupts ("MARC-EL": "Mid-Atlantic Railroad Corporation plus Erie Lackawanna"). Suppose something like this HAD gone through, along with the sort of regulatory reforms of the Staggers Act. One of the two northeastern rail competitors would in effect have been a reorganized PC operating under Stagger-y rules.

Not sure how this would have worked. Suspicion that MARC-EL would have been too weak to compete against a revivified PC. Indeed, I suspect that other people felt this at the time, and that's why MARC-EL wasn't established.