Was the Rock Island Line

Trains Magazine General Discussion
1

A road that shouldn’t have been built? I know hindsight is always 20-20 vision. Many times I’ve read that The Chicago, Rock Island & Pacific was, in some author’s views, somewhat redundant. “It went everywhere the Burlington did, only slower”, is a phrase I’ve heard bandied about. Consider the following- It seemed to be the ultimate grainger line. It went through several bankruptcies, including “the big one”. It dissappeared.

I’ll have to admit, that there was a lot about the Rock Island to like, in a nostalgic sort of way, but should it have been merged into another railroad back around the 2nd or 3rd bankruptcy?

2

I am not sure that it should not have been. There are several portions of the line that are fairly valuable today, and the industry really regrets the loss of the Memphis line.

I always thought UP + Rock Island was a better fit than UP + CNW.

Gabe

3

I think the ICC’s approach was to protect all the various vested interests. The RI could not merge because its many competitors, shippers and labor organizations would have gone to the ICC for protection from any harm. That just does not work in a world where everyone is going broke and there is way to much railroad capacity. As a result the inevitable math ground on with Wall Street picking winners and losers independently of the fantisy world Congress, through the ICC, was living in. The Rock Island’s shareholders and workers got to be among the losers. I wish them well in life after the Rock Island.

4

Well, the Rock Island was outside my sphere of interest and endeavor, and so my recollections are without the benefit of notes. As I recall, a fellow named John Ingram was at FRA or some such place, and was one of those bureaucrats in the Brock Adams mold – that railroads were “overbuilt”, “redundant” and therefore “economically inefficient.” My impression was that he took an opportunity at Rock Island to expedite the Rock Island’s departure – to fulfill that “vision” of getting rid of excess capacity. But when he got there, railroading took on a different appearance – the Rock served a real need, just as all the Midwestern lines did. It had an important transcontintental element, it served a wide range of agricultural shippers, it had a number of loyal industrial shippers.

His tune changed.

There wasn’t, he found, the redundancy that had become an ongoing regulatory argument. These railroads had been built to serve needs, and those needs by and large continued to exist. He became the foremost advocate of “saving” the Rock Island.

It was an interesting transformation, to this distant observer, to see the change in John Ingram. He almost pulled it off. A union strike did it in, just as the Rock was climbing over the hump.

The Rock, however, was the key example of a railroad whose financial situation was not just emblematic, but highlighted the corrosive ongoing events of the 50s and 60s, and how certain policies came home to roost in the 1970s. The Rock came into the 50s in pretty good shape. However, the enormous capital expenditures on motive power came entirely at the sacrifice of roadway. Short term debt was incurred even as long term debt was paid down – Rock had sinking fund mortgages as many old-line companies did.

By the time Ingram arrived, the Rock Island had the lowest debt to equity ratio of any of the big Midwestern roads. Better than any Class I in the country that I was aware of. Ordinarily, such a low ra

5

The story of business is easy. Be the first into a field (Microsoft) or be the best at what you do (GE). The Rock was neither and like so many thousands of other companies ( Desoto, Oldsmobile, Sears catalog, Etc.) paid the price.

6

But the Rock Island was the first railroad to cross the Mississippi just like Oldsmobile was the first American automaker to make a practical relatively affordable automobile (the curved dash Oldsmobile from 1901).

And Microsoft was neither the first, nor the best.

Bad examples.

7

Olds is a good example because they became just another middle of the road producer that was out of touch with the industry and the consumer. Microsoft started offering DOS for tha Altair computer and was extremely early in a fragmented market with no clear leader. They were the first to capitalize on a burgeoning PC marketplace and were for all practical purposes first to the segment.

8

Should the Rock have been built? Sure. There was sufficient capital raised to build it and to operate it for quite a while.

It is interesting that parts of the railroad have survived. Obviously at a fire sale, the valuable lines are purchased and the lines of no value are scrapped. The Rock in Chicago is a very important line handling thousands of commuters daily. The Omaha line still exists and is finding increased business. The Spine Line from Des Moines to MStP and the Golden State route are very important segments of the UP.

The value of the Rock was obviously in the hands of the bond holders at the end. They did quite well.

ed

9

I don’t know how much of a drain on the Rock’s finances the Rock Island Motor Transit Company was, but it always seemed to consume more money than it made. Maybe that was due to RI not knowing how to accurately price its trucking service to recover operating costs, and turn a profit. A lot of railroads with trucking company subsidaries seemed to have the same problem at the time. Perhaps someone could explain this better.

10

Michael: You make it sound as if CRIP was perhaps spending it’s energies looking for a merger partner, rather than plant improvements when affordable capitol was available? Were there times in CRIP’s history, when it was a strong, robust railroad?

11

Depends on what you mean by “strong, robust”? The GN had net income “typically” of between only 1% and 4% post WWII. Its operating ratio was deteriorating. It is described by some railfans as a “strong” railroad. These words seem to fly into the collective wisdom without much context or contact with reality. N&W was between 8-10% during the same period, with an improving Operating Ratio. What would be the threshold of “strong, robust?” GN? MILW? N&W? UP?

But if I was using either GN or N&W as the “control” I would have to look through a lot of data to make a comparison. I haven’t. But, without using a specific control railroad, the context of “strong” and “weak” in the railfan industry is so thoroughly corrupted by misuse, that the words themselves have little tangible meaning.

What I have noted is that 1) railroads engaged in serious merger efforts scaled back substantially on maintenance during those periods and 2) the unfortunate coincidence of an extraordinarily deteriorating economy caught hold just as those railroads had to “fish or cut bait” on infrastructure – and funds came at that key point in time at a much higher price than railroads ever had to historically pay.

The observation is consistent with modern merger studies. Kent Healy’s 1961 study, confirmed by DOT’s Western Railroad Merger study in 1969, only mirrored business experience in general, and present day studies show that nearly 80% of all mergers continue the historical pattern of ultimately failing. In part, this is due to pre-merger investment decis

12

Sol here encourages his readers to notice what he “expresses elsewhere,” though when I did that on another thread his reply in essence was, ‘wrong thread.’ Not sure what the game is.

As for the comment quoted above, while Sol admits he doesn’t know much about the Rock Island, it doesn’t stop him from making an expert analysis. My only comment on Sol’s thesis above that, “it’s the economy stupid,” is that the actual outcome of the Rock Island was more nuanced than that. Interestingly, too, he doesn’t provide any data, even though one of his frequent claims is that he always has facts and figures behind everything he says. Oh, but all that was said on another thread. My mistake.

I’m also not sure how to resolve Sol’s paradox that the Rock Island was not “overbuilt” and “redundant” (he says so above) yet was still part of his “Midwest Rail Crisis”. As Sol has told his readers in the past, there was a “crisis” with midwestern railroads which arose due to all their MILES AND MILES of “WORTHLESS” midwestern trackage. According to Sol, the Midwest core of the Milwaukee Road was a big part of that WORTHLESS midwest network. He brings that up whenever he defends the Milwaukee Lines West. Interestingly again, Sol has never been able to show his readers any facts or numbers on whether this Midwest Rail Crisis was real or not, just as he is now unable to support his Rock Island thesis with any numbers. But I just realized I have reference other threads again. Again, sorry.

13

But UP - C&NW = no PRB coal.

14

Wow, somebody’s looking for a fight. Unfortunately, I h

15

Rock Island’s funded debt was quite low, and for the gentleman looking for some numbers, here they are. I’m looking at 1968, as that was the last year for which I have detail data on the NP and GN.

Milwaukee Road, a 10,509 mile railroad, had a funded long term debt of $282,500,000. Southern Pacific, an 11,576 mile railroad had funded debt of $700,704,884. Santa Fe, 12,862 miles, was $292,895,037, Great Northern (8,264 mile RR) had a debt load of $266,100,000, and the Northern Pacific, a 6,673 mile railroad, had a debt load of $303,800,000.

You can contrast the above figures with the Rock Island in 1968, after five years of successive losses and with 10,972 miles of track, it had the most favorable debt situation of any of the above railroads, with only $124,734,480 in long-term funded debt.

It hadn’t invested much. John Ingram’s task, in 1974, was not enviable, and yet, he almost pulled it off.

16

If all the railroads had to go through the same economic downturns and problems at the same time, why did Rock Island sink, and the other grainger roads didn’t?

17

The postulate that regulation was the cause of failure invites that specific question. Oddly, when that proposition was made, no one raised the obvious question: why did some railroads fail and others succeed under the identical regulations? How did that common condition explain opposite results?

Why did Rock Island sink … with far and away the lowest debt load of the Grangers?

Well, I’ve tried to suggest that capital investment decisions of the 1950s and 1960s played the key role in the outcomes of railroads – and other industries as well – during the 1970s. If that isn’t apparent, then some other explanation must exist, and I don’t have it.

18

Should not have been built? No, it just needed to be consolidated by 1910. Who needed six direct (and two indirect) Iowa roads? No one. The ICC and TR intervened.

S. Hadid

19

Mr Hadid, whould you say Theodore Roosevelt hurt America’s railroads more than any other President ?

Would there be a President that helped the railroads the most ?

20

If I might throw in an item for consideration: the Rock Island’s western terminals? While the other “major” Granger lines had substantial western traffic gererating terminals/connections (the MILW had the PCE, the Q had the GN/NP, the C&NW had the UP) the CRI&P kind of fizzled out as it went west. The D&RGW connection (not in Denver but Colorado Spings) wasn’t going to feed the same traffic to the RI as the SP fed to the UP in Ogden; the Tucumcari connection was to the same SP that could send traffic eastbound over the Cotton Belt (and avoid short hauling itself) and traffic from the UP into Omaha seems to have been predominently interchanged with the C&NW. I’ve heard that the “Spine Line” (Minneapolis south to Kansas City) was the best route to be had but, compared to the transcontinental traffic, in a secondary market. (Michael-any figures convenient as to the relative amounts of CB&Q vs. RI interchange from the other Hill lines at Minneapolis? I’ve piqued my own curiosity…).

That quite a bit of RI trackage still survives but for different owners can indicate that the routes themselves were good but other lines controlled where the traffic originated and hadn’t as great a need or deisre to hand it off to the RI any earlier than they needed to (or at all) if they could keep it on their own rails for a larger part of the journey. The poor Rock had to live on the sufferance of its friends, and “If you want a friend in this world, buy a dog”.