PRR, N&W, Walbash, LV Question

Dominic

 

I do not know if the ICC had statutory authority at the time to block an acquisition or limit minority ownership.  The 1901 date posted by Ed King puts the PRR purchase of other eastern road stock prior to the US vs Northern Securities case.  That could be a relevant president absent which the ICC felt they could not act.

 

The 1964 divestiture of N&W stock by the PRR is also interesting.  While I have not seen a statute cited, apparently there was a tax change in the 1960s that made dividends paid from one company to another and then paid out as dividends to the shareholders of the parent company subject to double taxation.  According to NP historians Schrenk and Frey that tax law change spurred on the BN merger so GN and NP shareholders avoided double taxation on the CB&Q stock that had been held by the two transcontinentals since the Northern Securities ruling.

 

Buying N&W stock might have been the smartest thing PRR ever did; the second smartest thing would have been not interfering in N&W's affairs, and just reaping the dividends.

 

In a sense it was.  It kept the Philadelphia blue bloods living off of what they felt was the safest of income producing investments for a few generations.  On the other hand, the N&W revenue protected the PRR from the consequences of bad decisions for so long the company imploded almost as soon as they lost the economic crutch.

 

It would have been nice to see the N&W acquire the PRR at the turn of the last century.  Investment in better clearances so the Ys and Js could work over Horseshoe Curve and the As could haul fast freight further west would have given railfans something to see.  All the money wasted on excessive labor on obsolete power, odd ball late steam and the economic fiasco of electrification could have been avoided.

 

As it turned out  PRR management couldn't cut it without the N&W money.  After losing the shareholders money in a bad merger and bankruptcy the mess was so bad and the politics were so great the at the US taxpayer is still left holding the bag on the electrified lines.  After an interlude of Government ownership and "free market" monopoly we now have two major competing railroads in the north east thanks to the corporate successors of the Chesapeake & Ohio and the Norfolk & Western.  While 30 years of public ownership and monopoly could have been avoided by liquidation in the early 70s it might also have been avoided by the N&W's management taking over the operation of the PRR 100 years ago.

 

 

Interesting. i thought those steam engines came along much later than that.

and the economic fiasco of electrification could have been avoided.

 

Ted, not wanting to divert this thread, you have referenced PRR electrification as grossly poor judgement by the Pennsy brass several times on this forum.

 

The PRR execs new exactly what the costs and impact of electrification would be to the bottom line, and they knew what the payout horizon would be as well.

 

What they didn't expect was the crush wartime traffic of the 1940's would do to the plant and how that cost to repair the road and equipment affected their future, their dependence on N&W revenue, and ultimate demise.

 

back to your regularly scheduled program thread.

Pennsy's investment in the N&W was actually its second try.  In the 1870s the Pennsy had been one of the original backers in the Shenandoah Valley RR which was being built from Hagerstown MD to Roanoke.  Pennsy backed out and subsequent backers of the SVRR then acquired the Atlantic, Mississippi & Ohio and turned it into the N&W.

 

IIRC the acquisition of Lehigh Valley and Wabash stock occurred during the 1920s at a time when there was an effort to consolidate railroads in the northeast. 

 

 

 

 

Ted, (in joining in the hijacking of this thread) I'd like you to let us know upon what facts you base your claim that the PRR electrification was a bad move.

 

Please, also, describe to me how the Washington-New York corridor would have fared using the diesel power available at that time, much less steam.

 

Without electrification, that would probably have been the greatest rail transportation fiasco ever known.

 

EdKing

the economic fiasco of electrification

Chris

 

The PRR owned a right of way from New York to Washington DC via Philadelphia and Baltimore.  That is a very expensive piece of real estate!  And the PRR lost it in the PC bankruptcy bankruptcy.  If loosing possession of 225 miles of real estate doesn't define economic fiasco I'm not sure what would, at least for a private company.

 

It is also worth considering why the US government ended up owning the NE corridor.  Could it be that one of the best ways to ruin the value of a property is to put an electric railway on it?  What profit making enterprises operate electric railways?

 

The PRR execs new exactly what the costs and impact of electrification would be to the bottom line, and they knew what the payout horizon would be as well.

 

I'm sure they knew what the calculated costs and the ROI would be.  But the assumptions made in the 1920s based on 1910 steam locomotive technology wouldn't represent the real world of the 1930s.  Transportation technology changed so much that the cars, trucks, buses and airplanes of the late 1930s  were light years ahead of where they had been a decade earlier.  The only way a railroad could hope to compete was by having the flexibility to adapt service and costs to adjust to a changing marketplace.  The PRR was stuck with too much investment in one place.

 

What they didn't expect was the crush wartime traffic of the 1940's would do to the plant and how that cost to repair the road and equipment affected their future, their dependence on N&W revenue, and ultimate demise.

 

How could they not know their maintenance costs?  Track structure deteriorates with time and gross ton miles.  They knew the gross ton miles.  They printed calenders.  Did the PRR undercharge per revenue ton mile or did they pay excessive dividends?

 

It would have been nice to see the N&W acquire the PRR at the turn of the last century.  Investment in better clearances so the Ys and Js could work over Horseshoe Curve and the As could haul fast freight further west

 

 

 

Interesting. i thought those steam engines came along much later than that.

 

Charlie

 

The N&W Y-3 was the basis for the WW I era USRA 2-8-8-2.  The other designs came later.  I think it would have been nice to see the PRR adopt more efficient locomotives in a progressive fashion over the 10s, 20s and 30s.  That would have left the PRR with far fewer locomotives with pre WW I technology in the depression era and afterwards and avoided the whole duplex drive mess.

 

Please, also, describe to me how the Washington-New York corridor would have fared using the diesel power available at that time, much less steam.

Ed

 

I think you hit on the problem, what era?  Diesels of the late 1920s were not ready for mainline service.  By the late 1930s the B&O was getting as good or better utilization out of their E units as the PRR was out of their electrics.

 

The PRR went with a very expensive and inflexible technology in the late 1920s.  Ten years later the technical justifications for that decision were no longer valid.  Had the PRR followed the lead of other rail roads in the 1920s and 30s and used super power steam to cut costs in their most intensive services they could have avoided over investment in the part of their system most vulnerable to competition from other transportation modes.  They would have also avoided having hundreds of locomotives of pre WW I design surplussed from the NEC driving up the operating costs of the rest of the system.  

 

I imagine a PRR with some early E units, a large fleet of E-6s and FTs supplemented by 4-8-4s, 2-10-4s and perhaps some simple and compound articulateds with a whole lot fewer K-4s and L-1s in the 1940s.  Does that seem so far fetched for the PRR?  It worked well for the western lines.

 

So, after that interlude, back to the OPs question.  Does anyone know the state of legal affairs in the 1900 era that would have kept the ICC from intervening in the acquisition of N&W and other railroad stock by the PRR?

 

Comparing the PRR to the N&W or any western railroad is comparing apples to oranges. Different traffic bases, operating characteristics, etc.

At any rate, it's all conjecture at this point. Foamer fantasy, if you will.

OK, the NEC is a government controlled property.  So is I-95 and the Turnpikes in the area!  Plus the Atlantic Intercoastal Waterway.......

Dominic

 

Highways and waterways are built and maintained with public money and are open to access by the public.

 

The New York to Washington quadruple track PRR line was built with PRR money for the exclusive use of the PRR.  Bankruptcy and public ownership were not part of the business plan.

 

Comparing the PRR to the N&W or any western railroad is comparing apples to oranges. Different traffic bases, operating characteristics, etc.

 

Many railroads had operating challenges similar to those faced by the PRR.  Few reached the same conclusions as the PRR on how to economically meet the challenges.  Dismissing all comparisons to other railroads as conjecture is simply a way for foamers to avoid uncomfortable realizations about the "Standard" railroad.

 

The NYC had a level 4 track mainline with dense passenger and mail traffic like the PRR.  Save for the the approaches to Grand Central and Cleveland Union Terminals they chose not to electrify.  And they weren't powering their premier passenger and mail trains with front end throttled Pacifics in the 1930s and 40s.  They had Hudsons and Northerns.  The NYC also started tearing up unneeded quadruple tracks in the 50s.  It took until Conrail for the same to happen on horseshoe curve.

 

Western lines had significant grades similar to those faced by the PRR west of Altoona.  They tried to eliminate doubleheading Pacifics on passenger trains in the 20s and 30s usually by moving to Mountains and Northerns. Some even used 69 and 70 inch drivered simple articulateds to haul heavy passenger trains over the mountains without helpers.

 

The GN and the Milwaukee electrified their toughest mountain passes.  The GN eliminated their electrification as soon as Diesels were available.  The Milwaukee stuck with electrics into the 1970s and went bankrupt like the PC.  It is interesting to note that on the Milwaukee the first class of electric locomotives retired were the Westinghouse passenger electrics.  Their twin traction motor per axle and quill shaft drive design made them the most expensive Milwaukee electrics to maintain and therefore the first to go.   The same mechanical arrangement was used on the GG-1.

 

A middle sized western line like the NP did a much better job of advancing the state of the art in motive power than the PRR.  They innovated with Alco to produce the first Northern and Yellowstone types.  Both were designed to reduce or eliminate double heading Pacifics or Mikados.  They were early to adopt roller bearings on steam locomotives. They routinely operated Baldwin built roller bearing equipped coal fired Northerns 900 miles without change in passenger service.  They used simple articulates as versatile road engines and mallet compounds in the mountains.  They were significant FT buyers.  And they considered electrification but rejected it in favor of better steam power and ultimately diesels.

 

The PRR could have taken some of the ideas from the N&W on motive power and saved millions in operating and capital expenses.  But they just took the N&Ws money.  And that is too bad.

Ted,

    so what would be the vision for entering New York?  A loco change at Manhattan Transfer on every train?

 

Jon

 

So here Ted sits with the "benefit" of 90 years of hindsight - which is always 20-20, you know - and comes up with the conclusion that electrification equals eventual bankruptcy.

 

Not a valid conclusion, Ted.  The experiences of the Virginian and others don't bear that out, and the other examples don't hold water on close examination. 

 

I know guys who'll present supposedly cogent arguments that the N&W should have started dieselizing when everybody else did, and finished that job when most other rarilroads did.  They ignore such things as N&W's financial condition at the time (which was almost obscenely wealthy) which wasn't threatened by the continued use of steam as N&W had the most efficient steam fleet around and utilized it so well.

 

But hindsight is always 20-20; a lot of so-called "historians" take advantage of that fact.

 

EdKing

What I'm saying, Ted, is that you can foam all you want about 4-8-4's on Horse Shoe Curve, but it didn't happen that way for any number of reasons. I don't know why, nor do I care. What any now-gone railroads did and why they did it make no difference to me, and I certainly wasn't "dismissing" anything to "defend" the Standard Railroad claim.

It's sorta like armchair quarterbacking last year's Super Bowl.

Companies expend capital based on the foreseeable future.  Any money a railroad or any other major corporation spent in the first half of the 20th century, has to be viewed in the context of the time period in which it was spent.  The PRR's electrification of the New York to Washington main line (and subsequent electrification of the freight and passenger lines from Philadelphia to Harrisburg) is a prime example of this.  At the time these projects were conceived and built, the PRR leadership rightly perceived (in my opinion) the need to exist.  In fact, I would think that most rail historians would argue that it was this electrication that enabled the PRR to handle the huge increase in traffic brought about by WWII.  Don Ball in his book on the PRR in the 1940's and 1950's goes a step further and credits the PRR electrification for warding off a possible government takeover of all of the nation's railroads in WWII as occurred in WWI.

 

While the PRR certainly spent a lot of money on these electrification projects (money borrowed from and repaid to the federal government), you also have to consider how much they saved in locomotive maintenance and elimination of steam servicing facilities.  I would also imagine that use of electric freight and passenger motors dramatically shortened the turnaround time at either end of the corridor and served to reduce the number of locomotives required to handle a similar volume of traffic.

 

Appending a few more thoughts to my earlier comment. 

 

First, PRR was actually engaging in plant rationalization in the 1950's concurrent with the NYC.  PRR removed the westward number 3 track between PORT and MIFFLIN in 1955.  Other track removal projects occurred between Philadelphia and Lancaster and between Johnstown and Pittsburgh from the mid 1950's to mid 1960's.  Given the concentration of mineral traffic moving between Johnstown and Altoona combined with the grades in either direction, it is not difficult to understand why the physical plant in this area remained at 4 and 5 tracks into the 1980's when a number of mines in the area (and steel mills in Johnstown and the Pittsburgh area) had begun to close. 

 

Second, having re-read some of the comments posted above, there is a strong implication that had PRR avoided electrification, it would have avoided bankruptcy.  This tends to ignore the fact that by the mid to late 1960's, all of the northeastern railroads had one foot on the proverbial banana peel, including those who had not electrified major portions of their systems.  The problem, in short, was too many railroads chasing a dwindling traffic base.  

 

Curt

 

After reading all of the above, now I realize that Amtrak could make money if they just abandoned all of the electrification. Joke.

If electrication is so bad, why is it so predominant in Europe?

 

Surely, the Europeans also have density, maintenence and weather issues similar to what effects the Northeast corridor.

 

Rusty

I think we can look back on anything and second guess it now.  Decisions made, equipment on the roster, design and so on.  The PRR may have seen the writing on the wall but in terms of the freight traffic they had to contend with during the war?....I'm not sure they expected that. 

So here Ted sits with the "benefit" of 90 years of hindsight - which is always 20-20, you know - and comes up with the conclusion that electrification equals eventual bankruptcy.

 

Not a valid conclusion, Ted.  The experiences of the Virginian and others don't bear that out, and the other examples don't hold water on close examination.

 

Ed

 

I am not saying that early 20th century electrification equaled late 2oth century bankruptcy.  Several railroads resorted to electrification to solve early 20th century operating problems.  The Virginian was certainly one of them.  And I think the Virginia electrification supports my point.

 

As on the GN,  the Virginian electrification looked different economically after the arrival of diesels.  And like the GN the Virginian electrification was studied for extension or removal.  In both cases result was removal.

 

Can you think of a class 1 common carrier with electrification that kept it after WW II and didn't go bankrupt.

 

Certainly 90 years of hindsight makes it easier to draw conclusion that attempting to look into the future.  But in the case of the PRR it was only a period of 9 or 10 years in which the entire transportation technology landscape changed and with it the economics of the business.  Better steam could have helped the PRR avoid some very large investments that took away decision making flexibility from post war management.

 

Second, having re-read some of the comments posted above, there is a strong implication that had PRR avoided electrification, it would have avoided bankruptcy.  This tends to ignore the fact that by the mid to late 1960's, all of the northeastern railroads had one foot on the proverbial banana peel, including those who had not electrified major portions of their systems.  The problem, in short, was too many railroads chasing a dwindling traffic base. 

 

Curt

 

Certainly the change in the NE transportation marketplace is a huge issue.  I think heavy investment in electrification hurt flexibility in response to change in the market.  The unmentioned issues that were beyond huge revolve around labor costs and work rules.

 

If electrication is so bad, why is it so predominant in Europe?

 

European freight railroading is less efficient than in North America.  A higher percentage of European freight moves by truck than in the US.

 

It's sorta like armchair quarterbacking last year's Super Bowl.

 

Every coach who wants to win the next game studies past games.  GM, Chrysler and UAW management would have done well to read The Wreck of the Penn Central and The Men Who Loved Trains.

 

 

Well, I don't know about all you "book readers", but I was born & raised in Northern New Jersey during the war, and I can NOT imagine the PRR four track main line with all steam locomotives! Can you just imagine all the delays to passenger traffic alone?

Apparently Ted is an authority on railroads past, present and future.   I am, therefore, not going to waste any more time arguing about this... it's pointless anyway.  PRR, Penn Central and Conrail did what they did, and now we have NS, CSX and Amtrak.  It is what it is.

 

Have fun, guys.

even though I am quite well versed in 'book' knowledge, most of my insight comes from living alonside the PRR mainline since childhood. as late as the early 1960's the amount of traffic on the mainline was enormous (at least through central NJ), and I refer to freight traffic in addition to the commuter and long distance trains.

I would hazard a guess that about 30% of all tonnage was in freight, whether pulled by GG1s or E44s. a 100 car train was more usual than unusual, many times daily, not including what ran late overnight. I am loath to think how that would have been with diesel power.

 

what makes this discussion moot is that there is no direct comparison to another road that had invested as much in electrification, nor derived a benefit from, to test the argument against.

quote:

Can you just imagine all the delays to passenger traffic alone?

No, but, I can imagine all of the dirty laundry.

The ex-GN electrified line is now a choke point because the BNSF cannot purge the tunnel fast enough to run anymore trains trough it. 

 

Also, one reason PRR used wires because of smoke laws.  Even if diesels would have been up to the task in the 20's, SOME of the system would have needed wires.

 

If diesel prices keep going up, even with our shale plays literally in play, wires might go back up in very heavy tonnage, like powder basin, I think.

 

.

Well as a PRR fan, I enjoyed reading these opinions. Thanks to Ted and the PRR supporters for thoughts on both sides.

I have another book to get