We all know about the large railroads that went into Conrail back in 1976, and some may know of the smaller terminal or connecting lines. However, I was just reading up on the history of the Pittsburgh, Fort Wayne, and Chicago Railroad over on Wiki - and it states:
“On February 1, 1968 the PRR was merged into Penn Central. The PFW&C stayed separate, filing for bankruptcy on July 14, 1973 after Penn Central’s 1970 bankruptcy. On April 1, 1976 the PFW&C became part of Conrail”
I have always (ignorantly) assumed that all of PRR and NYC’s predecessors lines had been fully merged into those companies, and were certainly gone by the time of CR (other than the Peoria & Eastern). How many of these lines remained independent (although leased) up until the Conrail merger? Did any remain past April 1st, or did the mega-merger finally erase them from history?
How did the lease of the PFW&C differ from that of the P&LE and P&W - both of which chose to become independent roads during the 1970s?
Penn Central inherited an incredibly complex corporate structure from both PRR and NYC, primarily because both roads avoided bankruptcy prior to 1969 and it have been more of a regulatory nightmare to simplify it than to absorb the additional administrative costs. Most of these leased railroads were fully integrated for operational purposes and were often just shy of being wholly-owned subsidiaries. Anyone who has wandered through old issues of Moody’s Transporation Manual will know whereof I speak.
The key was, the subsidiaries had to be solvent. Solvent subsidiaries, like P&LE, had the option of remaining independent, while the bankrupt ones where folded into Conrail.
How many subsidiaries were there in 1976? Is this to say that the PFW&C, T&OC, or Big Four could have gone independent at the creation of Conrail? It seems that the P&LE was the only subsidiary that was independent enough to even attempt to seperate, then again, the P&W was completely assimilated when they came back.
I’ll have to admit that reading about the snake pit of corporate structure for both the PRR and the NYC has always been fascinating, right up until the headaches start. [:)]
Solvency was not an issue. P&LE, GTW, SSW and other majority to wholly-owned subsidiaries were maintained as separate operating entities for a variety of reasons: better rate divisions, simplify international operations, get around routing restrictions, etc.
Leases were another way of absorbing an operation short of outright acquisition or merger. This may have been done to avoid an expensive buyout, avoid diluting the interests of existing shareholders or because of legal restrictions. Leased roads in the Penn Central structure included the Big Four; Panhandle; Michigan Central; Philadelphia, Baltimore & Washington and a host of others. In other situations, the original Wheeling & Lake Erie was leased to Nickel Plate in 1949 and Wabash was leased to Norfolk & Western in 1964.
A one-time lease situation with which I’m familiar involves the South Shore Line. South Shore owned and operated its own trackage between the Illinois-Indiana state line and South Bend. The trackage between the state line and Kensington was owned by the Kensington & Eastern RR, a wholly-owned subsidiary of the Illinois Central. K&E leased this line to the Indiana & Kensington RR, a wholly-owned subsidiary of South Shore. Indiana & Kensington in turn subleased the trackage to South Shore for operation. I have no idea of the reason behind this arrangement.
I believe the P&LE remained independent was that powerful local interests had the “juice” to get a law passed by Congress which allowed all subsidiaries which met certain criteria to remain independent. Don’t remember what the criteria were and don’t know if any other subsidiaries met them. It was something like “All two-headed white elephants with purple splotches on their foreheads”, in other words, written specifically for P&LE.
Can’t give specifics, but there were a bunch of subsidiaries which required legal proceedings to merge into Conrail. I remember seeing the legal ads in the Wall Street Journal while in college (1976-78) which had numerous RR names I had never heard of (wasn’t a railfan then).
It’d be interesting to find out what those criteria were - I tried googling it with no results. Maybe someone who knows will eventually come upon this topic. The P&LE was one of the few subsidiaries to have its own image though, which I’m guessing meant they were at a greater arms length away from control by their lessor than most of other subsidiary roads were…
I think the P&LE case ended up in court. I vaguely remember some pieces about P&LE. I think USRA wanted it included, primarily because of the amount of traffic. I think P&LE ended up in the Penn Central bankrupcy estate. Not real sure about this. If so it would have helped the surviving company considerable as P&LE had considerable amounts of traffic at the time.(believe it or not Penn Centrals creditors actually got something on the order of $.03 cents on the dollar for the remaining assets of Penn Central(insurance company, non rail real estate, etc)
P&W was a little different in that PC had gone to extent of filing an abandonment petition. In addition P&W was still owned by other parties(not PC or New Haven)and was still being leased from those parties. They(the lessors) were very (pick your word) about P&W being abandoned by Penn Central. PC had stopped maintaining the tracks, had embargoed freight, etc. Worse still I think that some of the owners(lessors) were shippers on the line & wanted continued rail service.
Their was considerble talk of forcing Boston & Maine as well as Maine Central into Conrail as well. I am not sure about some of how Delaware Otsego was formed. I also seem to remember that the reason D&H did not end up in Conrail was to “provide competition”(some competition D&H was forced to use almost exclusivly Conrail Connections.)
Don’t quote me on any of this as I’m doing this from memory of articles I had read a long time ago.
B&M was considered in the original discussions regarding the formation of Conrail but was able to opt out when the Trustee stated that an income-based reorganization was possible.
D&H was excluded from Conrail because it was still solvent at the time. It got stuck with a lot of trackage rights operations over Conrail hopefully to provide some non-Conrail connections to outside the region.
Delaware Otsego was originally a collection of short lines in upstate New York, NYS&W later became part of this operation prior to Conrail. The growth of NYS&W during the Conrail era is an interesting story in its own right.