If railroading is all about hauling lots of freight between 2 origination / destination pairs of cities, Why did The Illinois Central Gulf shed so many lines, to become the lean, mean Illinois Central again?
In doing so, the railroad lost connections with Memphis, Birmingham, Omaha, Madison WI, St. Louis, and Indianapolis. Was the only traffic between Chicago and New Orleans?
Where to start?
After years of effort and failure, the conclusion was reached that the ICG could not be a profitable, on going enterprise. So the decision was made to sell off what they could.to whoever would buy it.
A previous attempt to sell the entire railroad to the Southern failed when, after study, the Southern came to the same conclusion. The ICG could not be operated as a profitable enterprise. The Southern made a negative offer. That is they would take the ICG if, and only if, they were paid to take it.
Some of the spin offs worked well. Such as the Indiana Rail Road. Some didn’t last a year. Such as the Chicago, Missouri and Western.
Then things changed. Union work rules were finally rationalized. That was a big deal. The ICG didn’t have long hauls. It had to compete with truckers at shorter distances such as the then important TOFC lane between Chicago and Memphis. (500 miles) The union rules that required 16 crew members to move a train those 500 miles bled the railroad dry.
Obsolete branch lines were shed. These lines had been built in the horse and buggy era and had no place in the modern economy. They also bled money.
And Hunter Harrison showed up. The IC was his first railroad turn around. As has been his style he cleaned out the good old boys of management.
There wasn’t a lot of freight between Chicago and New Orleans. New Orleans is a terrible port that exists largely because of the barges on the Mississippi River. They transfer their bulk cargoes to ocean ships there. But NOLA was left behind by the container revolution and that didn’t help the railroad.
Er, Murphy they never lost connections to Memphis, its right on their Chicago to New Orleans mainline. Also they retained access to E. St Louis (but only from the south), Chicago to St. Louis is a very short haul. One of the new IC’s most profitable hauls was from Geismar, LA (just south of Baton Rouge, LA) to Conrail in mid-Illinois, chemical trains. Also the rise of Corporate sized Chicken Farms in Mississippi caused them to reacquire the Iowa line (not really for the connection to Omaha).
Oops! [
] Sometimes I forget the world is round too. I tend to think of Memphis as being quite a bit further east than it is.
[quote user="greyhounds"]
Where to start?
After years of effort and failure, the conclusion was reached that the ICG could not be a profitable, on going enterprise. So the decision was made to sell off what they could.to whoever would buy it.
A previous attempt to sell the entire railroad to the Southern failed when, after study, the Southern came to the same conclusion. The ICG could not be operated as a profitable enterprise. The Southern made a negative offer. That is they would take the ICG if, and only if, they were paid to take it.
Some of the spin offs worked well. Such as the Indiana Rail Road. Some didn’t last a year. Such as the Chicago, Missouri and Western.
Then things changed. Union work rules were finally rationalized. That was a big deal. The ICG didn’t have long hauls. It had to compete with truckers at shorter distances such as the then important TOFC lane between Chicago and Memphis. (500 miles) The union rules that required 16 crew members to move a train those 500 miles bled the railroad dry.
Obsolete branch lines were shed. These lines had been built in the horse and buggy era and had no place in the modern economy. They also bled money.
“And Hunter Harrison showed up. The IC was his first railroad turn around. As has been his style he cleaned out the good old boys of management.”
There wasn’t a lot of freight between Chicago and New Orleans. New Orleans is a terrible port that exists largely because of the barges on the Mississippi River. They transfer their bulk cargoes to ocean ships there. But NOLA was left behind by the container revolution and that didn’t help the railroad.
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let me start by saying that I am not arguing with greyhounds information, as I know he was there when a lot of the changes to the
Except for removal of the double track, we’re saying the same thing.
The line sales were done to “rescue” investors’ money which was stranded in a non-performing asset. (The ICG Railroad.)
Here’s what I saw happen:
Effort to turn the ICG into a profitable, on-going enterprise. This failed and a conclusion was reached that the railroad could not be operated profitably. At least under the conditions prevailing at the time.
Effort to sell the ICG intact. This failed.
Decision to sell the railroad piecemeal in order to get as much investment as possible out of an asset (the railroad) that couldn’t provide a return to investors.
Hunter Harrison takes charge of what’s left. Shakes up management and turns it around.
The line sales were done for the benefit of the investors. And that was exactly the right thing to do.
The double track was removed simply because there was no longer a need for it. It could not be justified by either current or projected levels of business. I’m not aware of any significant adverse effects on Amtrak.
To illustrate what Grayhounds is talking about look at an IC map of Missippi any time between 1920 and 1950. The IC had FOUR north/south routes and a number of east/west.
From west to east what I call the River Line, very near the Mississippi River. Think Yazoo City, Vicksburg and Memphis. Next the current freight main. Next is the line that Casey Jones died on through Vaughn. This was the passenger main for years and has since been spun off. I was at Como the other day an noted it is equipped with very heavy, but jointed rail. All of these come together at Memphis. Finally there is the original main through Holly Springs, which is abandoned in part and short lined it part. Even in the 1920’s the river line and the old main saw no more than branch line traffic density.
Then the IC merged with the GM&O and got yet another north south line in Mississippi. Today the IC has one north/south main through the state. It does a good business AND supports ATK.
IC had to shed assets to survive. They started a bit earlier than the industry in general becuase they had proportionally more deadwood in 1965 than anybody except perhaps CNW. Yes the money from sales and abandoments went to the stockholders. It should have since it was always their money. Yes it went to diversification. It sould have since congress had made it impossible for the stockholders to make money in the railroad business.
Mac McCulloch
Mac, shouldn’t it be Clarksdale, rather than Yazoo City, on the way to Vicksburg through Memphis? The Y&MV had through service Memphis-New Orleans through this route–which survives in pieces.
Needed something to discuss as I am bored and ready to start working tomorrow.
Greyhound pretty much hit things on the head regarding the economics of the IC (ICG). Those branch lines really became a dead weight as economics of transportation changed. Jim Boyd has a wonderful book on the IC, the name escapes me, but it was pretty much on growing up in Dixon and then his short career out of the Rockford area. He indicated that during his youth the IC ran 3 or 4 trains daily each way on the line thru Dixon (branch line from Centralia to Freeport). By the mid 80’s that line was completely gone.
While “my” branchline (Mattoon - Evansville) never saw that kind of volume, the trains were quite healthy in the mid 60’s with 70 -100 cars being normal. The rails were 85 pound and quite old but 35mph was the standard. Daily trains ran in each direction. Slowly the freight disappeared and the line dropped to 25mph then down to 10mph and a good train was perhaps 25 cars (in mid 80s). Then the line was sold to Indiana High Rail, then in about 1995 the line was abandoned.
Why did the freight disappear? Well, the C&EI merger into L&N moved considerable traffic off the IC. Freight that at one time moved L&N/Evansville/IC now moved directly to Chicago…and much quicker. Grain elevators began consolidating and that freight moved away. In my hometown, a limestone distributor (to farmers) would receive perhaps 100 cars a year, usually 2 or 3 cars at a time. Decent business. When I came home from college in 1976 it had moved to trucks. Slow inconsistant service doomed the business. The local AMF bicycle plant in Olney would load out 3 to 5 boxcars daily (I worked in shipping one summer and personally helped fill those cars). Traffic patterns changed and full boxcars were no longer the pattern, plus the service was horrible. The Traffic Manager at AMF kept me in supply of Official Gui
Murph! You’ve hit one of my buttons! Railroads, like other American businesses, came under the control of bean counters and ivestment speculators who look at each segment of the property and its procedures as having to be a profit center. If it doesn’t make money, get rid of it. Consider the railroad main to a 12 inch water main fed by five 1 inch pipes, one three inch pipe, and two two inch pipes. One of the one inch pipes isn’t carrying enough water to make it worth while, so shut it off; the same with one of the two inch pipes. Now your 12 inch pipe is only carrying 9 inches of water, so better shut down more. Soon your 12 inch pipe is carrying five inches of water so you either abandon it or pass it off to another speclating gambler who will repeat your game until it is all gone. But the investors got triple their money back by saving money.
Deggesty,
You are probably correct. My north Mississippi geography is barely passable. South not so good.
Mac
My 1973 Official Guide also lists 5 daily Chicago - St. Louis and 4 St. Louis to Chicago trains. Obviously that has dried up. Today there is possibly one each way on the CN between Chciago and St. Louis.
Henry, the water mains in my town are owned by the municipality and that is quite different than the for profit motive of corporations. Illinois Central was on the verge of bankrupcty in 1979 with an operating ratio of 103.5% and net loss of $32million. It wouldnt have survived much longer without drastic measures.
Depends on when you invested in IC as to whether or not you got triple your money back. Some did even better, some lost.
Ed
But, MP173, the railroad, among others, were in bad shape because investors used the value of the railroad as collatoral to bet into other industries. IC, like PC, etc, went deep into real estate and other businesses as investments. The railroad suffered because the mony made, after striping bare, went into purchasing other things and not paying attention or even trying to run a railroad. The railroad was raided and robbed so that investors could use the money to make money rather than run a railroad.
The worst thing about financial reporting and statistics is knowing what is actually being reported.
Figures can lie - Liars can figure - it is up to investors and operations management figure out the true figures and work with them.
henry6: A couple of thoughts-
I don’t think that investors being in it for short term profits is a 20th century phenomenon, or limited to the railroad industry. I figure it’s been going on for as long as there has been investors and corporations.
I have trouble with the concept that the owners of the railroads were taking the profits out of the railroad end of the business and using them to dabble in non-railroad ventures. From what I’ve understood, the railroads post WWII weren’t making any profits to divert. The corporations that owned railroads as part of conglomerates were making more money off their non-railroad investments. Consequently, that’s where they were investing their money. Can you blame them?
Johnny:
The old Y&MV South out of Memphis has been cut a number of years back ( It used to run South through Tunica, Friars Point (ferryboat) ( Connected across Miss R. to Helena,Ar and served the M&NA RR( Missouri& North Arkansas). From Friars Point it roughly paralled Miss Hwy 1 down through Rosedale, to Greenville, Panther Burn and eventually to Vicksbur and Baton Rouge,La.
The current Main South out of Memphis (Johnston Yard, now E.H. Harrison Yd) to Lakeview in Desoto Cnty crosses Hwy 61 and follows roughly Miss Hwy3 South through Sledge, Marks, Indianola, and then follows roughly USHwy 49W South Belzoni, Yazoo Cit and then into Jackson. [ From memory! Hope its pretty correct. That line used to be dark territory, but may now be signaled?)
The Other line That was the old main South from Fulton, Ky through Jackson,Tn, Middleton, Tn, Ripley,Ms, Water Valley and tied in with the Old Main just North of Grenada, Ms. ( This is the line that was Casey Jones’ Home territory. pulled up in the Great rationalization period if the IC 1980(?), now Grenada RR)
The old Line South out of Memphis was the one known as the ‘Maineline of MidAmerica’ ( From Memphis though DeSoto Cnty, Ms to the Canton, Ms area is now the Grenada RR- Subject of the Thread last month on its abandonment).
The old GM&O fr
Raided? Robbed? BS.
It’s called disinvestment. And it’s an important part of any vibrant, growing economy. Making money is creating wealth. The wealth created goes to various folks such as employees, suppliers, customers, and investors. They all pay taxes. It’s a good thing. We have to create wealth to have such things as health care and education. Creating this necessary wealth is what an enterprise is for.
It’s good to take the money out of money loosing enterprises, such as the ICG railroad, as best you can and put it to work in the money making enterprises. Loss making enterprises destroy the wealth of a nation. Profit making enterprises increase the wealth of a nation.
Once it was determined that investment in the ICG Railroad was a hopeless loss making operation the guys in charge put the investment elsewhere. They did the right thing. They didn’t raid or rob, they put the money into better uses.
The investors included such things as pension funds, individual retirement savings, children’s college funds, etc. It’s other peoples’ money. The people in charge have a legal and moral obligation not to urinate it away. And putting it into a hopeless railroad would have been pissing it away.
I know you don’t understand or accept this. And you certain
Why did the IC acquire the GM&O? Did the management think it could divest a lot of it (even in the face of the ICC) while adding its revenue to IC’s business? Or might it have been that IC was concerned that a larger railroad would take over the GM&O to IC’s detriment?
Didn’t a lot of Iowa grain along the IC go to New Orleans for export? Rent-a-train?
Might an alignment with CP(Soo Line), or the MILW for that matter, have made a difference at that time? As I recall, BN came together around 1970.
[quote user=“samfp1943”]
PNWRMNM:
Deggesty:
Mac, shouldn’t it be Clarksdale, rather than Yazoo City, on the way to Vicksburg through Memphis? The Y&MV had through service Memphis-New Orleans through this route–which survives in pieces.
Deggesty,
You are probably correct. My north Mississippi geography is barely passable. South not so good.
Mac
Johnnie:
The old Y&MV South out of Memphis has been cut a number of years back ( It used to run South through Tunica, Friars Point (ferryboat) ( Connected across Miss R. to Helena,Ar and served the M&NA RR( Missouri& North Arkansas). From Friars Point it roughly paralled Miss Hwy 1 down through Rosedale, to Greenville, Panther Burn and eventually to Vicksbur and Baton Rouge,La.
The current Main South out of Memphis (Johnston Yard, now E.H. Harrison Yd) to Lakeview in Desoto Cnty crosses Hwy 61 and follows roughly Miss Hwy3 South through Sledge, Marks, Indianola, and then follows roughly USHwy 49W South Belzoni, Yazoo Cit and then into Jackson. [ From memory! Hope its pretty correct. That line used to be dark territory, but may now be signaled?)
The Other line That was the old main South from Fulton, Ky through Jackson,Tn, Middleton, Tn, Ripley,Ms, Water Valley and tied in with the Old Main just North of Grenada, Ms. ( This is the line that was Casey Jones’ Home territory. pulled up in the Great rationalization period if the IC 1980(?), now Grenada RR)
The old Line South out of Memphis was the one known as the ‘Maineline of MidAmerica’ ( From Memphis thoug
Post WWII is 1945-1955. After that it was an investor’s run at the money. And IC’s investors led the way in diverting railroad income to other interests in the 60’s, 70’s, and 80’s. Penn Central, and its ancestors, were also caught up in “non traditional” revenues, i.e. real estate. IC was into real estate, grocery store chains, drug store chains, and others. And, no, it was not a 20th Century phenom nor problem. Railroads used to own the coal companies and mines and cars and distributors and retailers in addtion to the railroads…but all those funds more often went into company coffers. Different business laws governing trusts, verticle trusts, holding companies, etc, changed over the years. Today a company can control any other company it wants to through holding companies. Thus Berkshire Hathaway can have men’s belts and the BNSF railroad in its portfolio for instance. And while General Electric makes diesel locomotives to the world, it also has one of the world’s largest capital funding orginizations, too. It is as much what the structure is as what is done with the money earned. If it goes back to the business in which it comes is one thing but when it goes strictly to feed the greed of investors it is another thing. IC was feeding its investors rather than running a railroad after 1960.