Interesting opinion. The UP “already” served Seattle ahead of the Milwaukee by what, seconds, minutes? The “Joint Line” into Seattle was shared. Milwaukee actually built it and maintained it. UP piggybacked on Milwaukee Road into Seattle. That means … what?
Add Butte, historically, and Portland after 1971.SP was intrigued by that Portland connection, and was using the MILW transcon fairly heavily considering that it was shorthauling itself to do so.
The “other” major markets were … what? Ephrata? Davenport? Havre?
By the time the Rock went belly up, the Union Pacific was already heavily invested in the CNW as their primary Chicago routing partner (which came about just as the UP lost interest in the Rock merger in the early 70s). By the late 70s the CNW’s route across Iowa was selected as the “preferred” 4R rehabilitation route as well, so by 1980 the CNW main line was in pretty good shape, whereas the Rock and especially the Milwaukee (whose Iowa Division main had been severed since 1978 between Tama and Atkins) were in very poor shape. Another caveat of the CNW was the “Fremont Connection”- which allowed UP-CNW runthroughs to bypass Omaha/Council Bluffs by running over the CNW’s line via Blair, something the MILW and RI routes couldn’t offer.
That connection was featured in a Trains article at the time, titled “Flight of the Falcon” if I recall correctly. However, since we no longer have the on-line “Index to Magazines” available to us here, I can’t readily provide a citation to the issue date and page, author, etc.
It was “there” but I don’t recall that much traffic going that way.
Later mergers of Western railroads occurred in the context of the ICC’s mishandling of the 1960’s merger plans. Everyone – and I mean everyone – had the idea that there needed to be a series of mergers particularly among certain Western railroads. This had begun in the 1950s when the CNW and MILW first talked merger. And that was a big one. As it fell through, it got everyone thinking because it would have changed traffic dynamics of the Midwest and West considerably. By 1964, negotiations had brought out the following plans: 1) MILW/CNW (again), 2) UP/RI, and 3) CBQ/NP/GN. There were numerous others, involving some of these roads simultaneously, but these were the biggies. And each was, in some respect, a direct reaction to the others, in an effort to protect traffic origination, and to maintain the leverage of size. CNW stuck its fingers into the pie by also applying to get the Rock or parts of it, and opposed the Northern Lines merger as well.
UP was in the toughest position, strategically, because any merger would dilute its traditional strong earnings source: the long haul with low collection and distribution costs – other railroads did 80% of that work for UP. It was the perfect “bridge” railroad. Merger with ANYONE would dilute that strength, and history has shown that that is exactly what happened. It was a little hard to explain to shareholders: “never again will your dividends be as strong and never again will we achieve 65% operating ratios, but this is for the good of the company.”
MILW and CNW was an ideal partnership, and that had been recognized since the 1860s. It would have greatly strengthened the lon
The financial condition of the SP, as the paramount source of traffic for UP, was of great concern. And SP had become a somewhat less friendly connection for that traffic in recent times, for a variety of reasons relating to UP’s position on rate divisions. But, it was deteriorating and entry in bankruptcy could have led to various alternatives. My view is that, without the BN/ATSF merger, UP would still have been inclined to move on the SP simply because circumstances internal to SP compelled it. UP equipment was suffering lengthening cycle times because of SP’s condition, for instance, and this was having a direct financial impact on UP’s financial performance and ability to deliver equipment.
UP’s fate had always been tied historically to CP/SP and there was nothing to be gained by letting that relationship be left in the hands of a bankruptcy trustee.
Yes, ATSF had performed poorly under Kreb’s management and fiery temper. Several of my friends worked for the man, and had little good to say about either his management skill or his personality. I would have to go back and look, but my failing memory seems to offer that after Krebs came on board, BN’s financial performance began to falter for exactly the same reasons that ATSF’s had faltered under Krebs: costly projects, no sense of IRR.
But wasn’t either GN or NP going to go away in any case – as the Milw did? In those days, elimination of “redundant” trackage was one of the things driving mergers: Get rid of that nuisance competitor that was responsible for both of you making a poor living.
S.P. going for Milw’s PCE would have been different, representing a territorial expansion.
Your mention of IRR (internal rate of return) was an elusive concept that few still understand.
However, today’s BNSF, UP and I presume other Class 1’s appear to have it. Since you appear to have it I would reqest that you offer a condenced explanation.
I have mentioned this concept twice before on other threads and RWM commented about it and a lack of understanding from those he presented it to…
Wait a minute here - Krebs famously graduated from the Harvard School of Business, after Stanford. How could he have done that if he had no sense of Internal Rate of Return ? I couldn’t have passed even my senior year Engineering Economics course without that and knowing how to apply it . . .
And IRR wasn’t new or rocket science even in the 1960’s - my textbooks on it had been written some years by the Bell Labs guys. . So Krebs must have known what it was - but perhaps he couldn’t or wouldn’t apply it, or was forced by circumstances to take acts that did not have a decent IRR.
Can you provide some examples of those costly projects ? The Powder River Basin line was largely built by then, and right now I can’t think of or remember anything major that either railroad did in that time frame - no new classification yards or line relocations, purchases of fleets of cars or locos, other acquisitions, etc. - but maybe my memory is failing, too.
In the late 1960s the line was underutilized with only a couple trains a day out to Fremont- of course by comparison in the late 60s the CNW was running about 10-12 trains a day total on it’s main line across Iowa.
When the CNW and UP realized the value of the connection- by the mid 1970s the traffic going via the Fremont Connection was quite a bit more-
WESTBOUND-
237 Wood Street (Chicago) to Fremont (UP)
Advance 239 Wood Street (Chicago) to Fremont (UP) “Falcon”
239 Wood Street (Chicago) to Fremont (UP) “Falcon”
Advance 243 Wood Street (Chicago) to Fremont (UP) “Falcon”
243 Wood Street (Chicago) to Fremont (UP) “Falcon”
245 Wood Street (Chicago) to Fremont (UP) “Falcon”
247 Proviso to Fremont (UP) - “Pak Rak” Autos/TOFC
249 Proviso to Fremont (UP) - manifest/perishables
251 Proviso to Fremont (UP) - manifest
253 Proviso to Fremont (UP) - manifest
Eastbound
236 Fremont (UP) to Chicago - TOFC
238 Fremont (UP) to Chicago - TOFC
242 Fremont (UP) to Wood Street (Chicago) - TOFC “Falcon”
244 Fremont (UP) to Wood Street (Chicago) - TOFC “Falcon”
248 Fremont (UP) to Wood Street (Chicago)
250 Fremont (UP) to Proviso - manifest & TOFC
252 Fremont (UP) to Proviso - manifest
256 Fremont (UP) to Beverly, IA - manife
Well, that’s an interesting description of competence.
As I mentioned, my opinion is second hand from former colleagues that worked for him.
Fred Frailey, in the February 1998 issue of Kiplinger describes “buying new locomotives by the hundreds,” opening “big new truck-train terminals in Chicago, Los Angeles and Dallas-Fort Worth,” and “adding track capacity across Oklahoma, Texas and New Mexico,” as well as a new computer system.
As the context above should have made clear, those were mentioned as mere examples to elucidate what might be the “costly projects” that you mentioned - nothing was said about them having anything to do with competence.
But I misunderstood the scope of your reference to your former colleagues - which you’ve now clarified or restated - so your not identifying such projects is understandable.
The underlined portion refers to the double-tracking of that segment of the Southern TransCon Route, which I should have remembered because that is the ‘popular’ understanding of the reason Krebs was removed as CEO of BNSF by the Wall Street types who wanted more of that Internal Rate of Return faster on those incremental investments (you know - like their selling sub-prime mortgage bond pools and default ‘swaps’ on the same, I suppose).
The rest seems like ‘business as usual’ for a modern Class I railroad.
The railroads had plenty of competition – from trucks, barges, planes and cars as well as each other – much of it underwritten or otherwise propped up by government. (There’s some Marxism in action for you.) Given the circumstances and outlook of the day, would you seriously argue that the rails were not overbuilt for the traffic they could still command in the 1960s and '70s? Elimination of fighting among themselves for the scraps, thru merger of parallel lines, was one of the few options.
No, the 1970 BN merger wasn’t a magic bullet, and recovery didn’t happen overnight. (The industry itself was another 20 years pulling out of the ditch.) But 40 years later, BNSF’s rationalized northern transcon still has sufficient capacity for the traffic, with Stampede Pass, Montana Rail Link and some other options waiting in the wings if they’re needed.
This illuminates nicely the earlier comment about people, even in the rail industry, having no concept of IRR – Internal rate of return. It is also an example of post hoc ergo propter hoc.
The BN merger of 1970 was not designed to paint a pretty picture 40 years later. It was designed to solve the problems of 1970.