BOOK REVIEW -- THE MEN WHO LOVED TRAINS by Rush Loving, Jr.

Trains Magazine General Discussion
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For his first book Rush Loving, Jr., a journalist who specializes in business and transportation topics, has given us a truly engrossing, suspenseful, yet cautionary

“must-read.” In the mid-1960s, Loving tells us early on, the modern merger movement was already underway following Norfolk & Western’s acquisition of the

Wabash. The N&W brass then asked themselves where next to try a merger and the answer was obvious: The Pennsylvania Railroad. The two roads had a kindred

history of cross-ownership, complementary coal routes (Pennsy-anthracite / the Norfolk-bituminous), excess Midwestern lines crying for rationalization, nicely

meshing home regions (Imdustrialized Northeast / Upper South), similar “command” or top-down military-style departmental cultures, and even a history of shared

passenger livery (“Tuscan Red.”) But the marriage that sounded so good in theory took more than thirty years to achieve. It wasn’t until 1997 that Norfolk Southern

bought nearly sixty percent of Conrail, most of it ex-Pennsy routes. Meanwhile rival CSX needed the eastern half of the Central’s old “water level route” so

desperately that, all told, it settlted for just over forty percent of Conrail, and what they did get resembled to a degree a good-sized chunk of the old New York

Central.

What happened in those interim thirty-plus years is the subject of THE MEN WHO LOVED TRAINS, and the results are as infuriating as they are informative. As

researched and told by Loving, we feel the railroads’ pain but also understand the malarkey that underlay the malaise. The late Sixties brought forth absurd over-

regulation by the late and unlamented ICC, the formation of the Penn Central in 1968, and the new merged road’s inevitable meltdown into bankruptcy in 1970. This

era saw big Northeastern carriers and regional lines l

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al-in-chicago:

Nice review. I am just about finished with it … this is the second time I have read it and I am yearning for a more in depth history of Conrail.

My personal favorite hero in the book is Stanley Crane. Was there ever a better man in a tougher spot in the railroad industry? If there is a book on him, please let me know. I agree with you that LeVan did a very good job in maximizing shareholder value down the stretch. It might be worth the side trip to visit his HD dealership and strike up a conversation with him if ever in the area.

I didnt come away with much of a positive opinion of John Snow.

ed

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Thanks for the kind words! I felt certain you will really like the book.

I agree with you–Crane is an exemplary man among exemplary men. W. Graham Claytor was a tough act to follow but Crane performed brilliantly. Alas, If I had had time to discuss everybody, though, I’d come up with a dissertation(!)

Thanks again,

al

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I too, enjoyed reading this book. Sometimes, after reading a book I enjoy, I find myself analyzing why I liked it. (Note to self: I analyse wayyyy too many things…) Did you enjoy this book due to the subject matter, the author’s writing style, or the way in which the information was presented?

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Murphy:

I enjoyed the book for all of the reasons you indicated. It was well written, obviously well researched (sure enjoyed the fact there were no footnotes), the author had some great inside access to the main people involved. I enjoy reading business books such as this, that read like a novel.

A couple examples are Barbarians at the Gate which deals with the 1988 LBO of Phillip Morris by KKR. Another one that is not as well know but just as well written is 24 Days by Rebecca Smith and John Emshwiller. It is about the Enron collapse. The two authors were the Wall Street Journal reports which covered the collapse. They were the ones which broke the story and were on the front lines of the collapse.

My college Independent Study was entitled Can Conrail Survive. I wrote it in winter semester of 1977. I cant find it! I would love to go back and see what I had to say about it. I know that my findings were that Conrail could survive if certain things occured. I cant remember what I had to say.

ed

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This thread was inspired by a book review of Rush Loving’s THE MEN WHO LOVED TRAINS and the last previous post was Feb. 19, 2007.

A post that might be sparked by the book but not central to the book–Best Book About Conrail, for example–can stay as is or be moved to a specific post of its own, thread-founder’s choice, if suitable.

This is where to post what you have to say about THE MEN WHO LOVED TRAINS or the specific issues it raises. Note the slight name change: from REVIEW to DISCUSSION…but the original review is still available.

I’ll start the ball rolling with a going issue: IYO Who was the person most culpable for the Penn Central meltdown: David Bevan, Stuart Saunders, or perhaps somebody else . . . ? [;)]

al

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There is clear evidence that Saunders allowed Bevan to maintain three sets of books. One for the board, another for the government and a third for the public and shareholders. That was exactly what happened at Adelphia, Enron and WorldCom. Bevan should have gone to jail for that, Saunders should have been heavily fined, at the very least.

The chapter on the birth of Amtrak was very enlightening, and shows how the fiction that Amtrak could make a profit got started, a story that persists to this day, and will vex true Ambelievers as long as Amtrak lasts![V]

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I think the PC was going to be a dead duck from the word go. Given the conditions at the time, no one could have pulled it off. As far as how it melted down, Bevan seems to have been the slippery money man, who should have known better. Saunders seems like the politician, who wanted to tell everybody what they wanted to hear, without any idea he was making promises he couldn’t keep. Pearlman seems to be the honest one. He was trying to make the railroad work. He, I think, was the only PC higher up to hold onto his stock, while all the others were dumping theirs. Some (Saunders and Bevan) seemed to telling the world what great shape PC was in, while dumping their stock as fast as possible.

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I think the fix was in on PC when the ICC made them take the New Haven in as part of the merger. Before that, they would have been very lucky to have made it.

Bevan certainly seemed “creative” with the accounting, he was extremely slick. Saunders had to have regretted the day he packed up his belongings and moved from NW to PRR.

Rather than assign the most blame to anyone person, just look at the issues:

  1. Too much track with low revenues.

  2. Passenger service bleeding dollars.

  3. Labor costs out of control, even before the agreement Saunders hammered out to insure the passage of the merger.

  4. Low divisions of revenue on interchanged traffic.

  5. Declining industrial base in the region.

  6. Deferred maintainnece for at least a decade.

  7. Red/green team differences.

It wasnt going to work.

ed

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Add to that regulation, that would ensure that no one in the northeast could make a living, given the economic conditions at the time.

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Bevan may or may not have to eat his soup with a corkscrew, but he was noticeably prescient in a way Saunders or Perlman were not. Authors Joseph Daughen and Peter Binzen, in their book THE WRECK OF THE PENN CENTRAL (1971, Little, Brown & Co., Boston) speak of the Pennsy’s “lone-wolf financial expert” and his less-than-optimistic view of the long-term effects of a merger. As a witness before the ICC, way back in 1962, “Bevan warned the ICC of the PRR’s tremendous debt. More than $1 billion in debt would be due in 1982, he said. . . ‘No other railroad has as much bonded debt coming due in the next fifteen years as we do,’ Bevan testified. He displayed little optimism over immediate gains from the merger” (all quotations from p. 62 of the book).

And this was the year before Saunders kicked himself upstairs from head of the N&W to CEO of PRR.

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? I thought Saunders had been picked as a succesor by PRR president Symms?

( I bet Saunders kicked himself when he figured out PRR and PC weren’t a picnic like NW had been for him.[;)])

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I was being ironic. Sheesh.

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[(-D]

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I’ve come to believe that a PC crash/Conrail fix was somewhat inevitable in the northeast.

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[#ditto]

Based on any scenario I can envision, I agree with you. Being forced to include the New Haven in the merger may have accelerated the crash, but yes, I think it was inevitable.

Maybe if Congress had honored President Eisenhower’s request in 1956 that the new Interstate Highways be toll roads, spanning the distance between city’s edge and city’s edge–well, I presume mass transit in cities would not have declined so precipitously. Maybe intercity travel by train would not have suffered as much, too, since one thing most passenger systems are good at is bringing the passenger right into the middle of the city – inner cities that wouldn’t have been hollowed out if the “free” Interstate Highways hadn’t gone downtown. . . IF the ICC hadn’t been around with its penchant for busy work coupled with an apparent inability to see the big picture–how the RR’s as a national system were evolving. . . IF the Pullman Company didn’t call the shots and do its best to ignore innovation like the NY Central’s Slumbercoaches in the mid- to late-fifties (requiring only a ticket plus room charge; not a ticket-and-a-half for an arbitrary “first class” passage plus a pretty high room charge for the Pullman bed). Even so, I think it would have happened someway, somehow, despite all the maybe’s and If’s I can rack up.

The sad fact was that Pennsy and NYC had been running scared since the mid-fifties as they saw their passenger business (starting with business travelers) fall off, whole factories disappear, etc. As I mentioned in a post above, David Bevan was very blunt and very discouraging when he testified before the ICC regarding the proposed merger back in 1962. He basically said such a m

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I’m not sure I share your opinion of Stuart Saunders. Mastermind, and turnaround, don’t seem to be words usually used to describe him. When he was at N&W, he was in a railroad that many said almost ran itself. At that time, it was a coal conveyer belt, moving black diamonds from the same mines to the same ports, over and over. The N&W is always portrayed as being quite conservative. This makes sense to me. If it ain’t broke, don’t fix it.

That he got called up to PRR, to me at least, is a prime example of the “Peter Principal”. You do a good job, you get promoted. This keeps happening until you are one step above what you are capable of handling. I haven’t read that Suanders did much at PRR that any other railroad president would have done, in that position, and who would have gotten the same results. I feel that may have been more the situation,than the man.

It appears that Stuart Saunders became captain of a sinking ship. Rather than admit that there wasn’t a whole lot he could do to stop the ship from sinking, he seemed to keep right on proclaiming everything was just peachy. He did this right up until the time the ship hit the iceberg.

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Murph, I said “something of a turnaround,” not Joan of Arc.

If you have a copy handy, take a look at page 66 of THE WHO LOVED TRAINS (Daughen and Binzen, authors, 1971). Saunders took office on October 1, 1963, the exact sam

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You’re right about the devil is in the details. Saunders wanted to run a big, multi-industry conglomerate. He bought into all kinds of non-railroad companies. Those were keeping the consolidated earnings picture looking rosy. All the while, he and Bevan neglected to point out, that their railroad empire was crumbling. The profits from the non-railroad businesses was being paid to the railroad business to hide that fact. When things got really bad, they started selling off their golden geese to raise cash. Things then quickly went from bad to worse. In 1970, I doubt anybody would have called him the businessman of the year.

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I recall that the Saturday Review itself went broke in 1972 or so. So much for judgment.

Key point here: details.

Suppose Saunders had decided to run a railroad.

Instead of a real estate company, an insurance company, a management company, etc. etc.

An ICC study in 1977 showed that railroad companies that were owned by holding companies – that is, diversification efforts – performed on the average a full point below non-diversified railroads in profit margins. Studies as a whole have shown that the “conglomerate” model so popular after Saunders time – popularized by the Pennsylvania RR model – and notwithstanding the Penn Central debacle, generally performed poorly primarily because of management overstretch – one reason why mergers in general so frequently fail.

And how much time was taken away from “managing” the Pennsylvania Railroad, and devoted to "schmoozin