I am a little confused when comes to saying of deferred maintenance. If you’re not
spending money maintenance or upkeep. Where is the money going?
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Welcome Aboard, @Gooch
Somewhere else, If a railroad gets into financial trouble, it’s usually the first victim of budget cuts.
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The usual reason for ‘deferred maintenance’ is that money’s not there in the first place, not that it’s being directed to other uses (or deflected into retained assets or stockholder dividends).
In some cases the deferred maintenance is done ASSuming another entity, such as a government commuter authority, will pay for the work ‘later’. In other cases, speed is not so critical that a string of slow orders compromises the operation.
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It’s a fancy way of saying they’ re not doing any maintenance at all because the money simply ain’t there. Ideally, it’s being used just to keep the trains running but there’s a good possibility it’s going into executives and shareholders’ pockets. A lot of US railroads in the 1970s especially in the northeast found themselves in a bad financial situation and one of the expenses that got cut was maintenance. It’s what led to the fall of the Penn Central and eventually the creation of Conrail.
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First, welcome aboard!
It’s going to the absolute necessities (such as fuel and salaries). Downgrade class II track to 1 and 1 to excepted. Fix things when you have to instead of preventive maintenance. No more rail grinding or resurfacing. You patch up your motive power to keep it running and any major failure means deadline instead of repair. For a 21st century example, look at what Guilford did over forty years of ownership.
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Pick up a copy of the “Wreck of the Penn Central” and you’ll see a classic case of deferred maintenance. The ‘merger’ was probably doomed to failure at the onset but it wasn’t helped by the mismanagement of funds by some of the top echelon.
https://www.newspapers.com/article/the-evening-times-five-indicted-in-alleg/146291419/
Penn central held stock in C&O/B&O and Norfolk & Western and sold the stock as a condition of the merger. Those proceeds were fraudulently used and not reinvested in infrastructure as investors were told. Look up ‘Executive Jet Aviation’ where a huge portion of the money went*. Also proceeds from the sale of real estate went into management’s pockets rather than for railroad expenses.
Forcing the New Haven into the mix caused even more of a drain. Years of bond debt didn’t help, either.
- The total ‘loaned’ to Executive Jet was approximately $21M and actually began in 1965 while still under PRR oversight. Besides the loans, railroad funds were used to buy phony EJA stock. The whole unlawful scheme (1958 Federal Aviation Act prohibited railroads from investing in air carriers) funneled about 136.5 million (1970 dollars) out of the Penn Central’s coffers.
Regards, Ed
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Welcome on board, Gooch.
It is similar here in the U.K… If the owners want to close a line, stop maintenance on bridges etc. Then say they are too expensive to repair therefore close the line.
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That execrable Bevan had something to do with Executive Jet, and with the Lassiter Sonic 1 hornswoggle too, if I recall correctly. Weren’t there willing young women involved?
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“Trophy” women who would follow a wad of $100 bills anywhere you lead them. Miss “Hurst Golden Shifter” among them. These were arranged by a fellow named Joe Riccardi. Lassiter turned in expense account charges of $60,000 for 1968 alone. CEOs of Pan Am and United Airlines that year were only around $7000 each.
The then PRR executives, about 26 in all, set up a side business, Penphil Co. as a ‘private investment club’. In subsequent investigations it turns out that about $2M of Penn Central capital had been funneled to Penphil.
Bevan even set up a shell corporation called the First Financial Trust of Liechtenstein in order to secure loans from German lenders. Saunders was actually hoping to unload the interests of Executive Jet to U.S. Steel. Saunders was on their board, of course. When US steel found out that Pan Am had got wind of the secret deal they threatened to blow the cover by involving the Civil Aeronautics Board. Penn Central was eventually fined $70,000 and Executive Jet appointed Paul Tibbits of Enola Gay fame as its president.
This could easily be a “how-to” road map for the likes of Enron, World Com or Bernie Madoff. Ironically, what’s left of Executive Jet, DBA Net Jets, is owned by the same guy that owns BNSF, Warren Buffet’s Berkshire Hathaway.
Cheers, Ed
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NS put lipstick on it’s wabash branch and got out of town. Indiana Hi-rail didn’t help. The Maw owner put the money in his pocket(videos of the worlds worst RR). The NDW still has spots to fix in the swamp but they are not derailing every day like the predecessors. Here is a picture of the NDW with a leftover from the Maw.Things were not AOK when it got to the Maw.
stay safe
joe
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They call this information, “The rest of the story” endmrw0511250952
Ref 7 of 11 posted this date (gmpullman post)
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