We have had excellent discussions on this forum about the decade of change (1970’s). Gabe started this topic awhile back and then we jumped into the Chicago and North Western discussion which covered the Omaha - Chicago issue…among others.
Now, I am going to throw this out there for discussion. Presently we have the four major US carriers plus the Canadians, with some US exposure and KCS. Then the regionals. These seven lines are the backbone and nerve system, if you will of the US railroad system.
The merger process which began in the 1970’s (actually in the 50’s, but I am counting the Conrail merger as the BIG first step…correct me if I am wrong) was almost a domino effect. Everything that occurred led to a reaction merger, it seems.
With most mergers (not all) there seemed to be one dominant carrier. It could be argued that C&O was the base for the present CSX system. NS is a bit more complex with NW and SOU being pretty much equal. UP gathered carriers in the 80s (MoPAC, WP, MKT)…no mergers here, takeovers. BN and ATSF finally tied the knot after all of the UP activity.
What made the strong carriers of the 70’s such as C&O, NW, SOU, MoPac, UP, etc so strong? Sure, MoPac didnt survive it’s corporate identity, but it was a fine railroad.
What was(were) the determining factor(s) in each of the strong carriers? Why was Southern so much stronger than say SCL? NW over Chessie? Santa Fe over Southern Pacific? etc.
I believe the determining factor was the routing of the rail lines. The “winners”, for the most part (usually) had the best route between A and B; and also the important A’s and B’s to connect.
As for the mergers and surviving companies, it was probably largely in part to the vision of the executives involved, doing what they were paid for: to grow their respective companies and depend on efficiencies to improve the bottom line. Probably an oversimplification.
I agree…BN was the first big merger. How I overlooked it…cant quite say. No doubt the best route had quite a bit to do with it also. But, when one looks at comparing Southern to SCL, how much difference was there? Also the comparison of Southern vs L&N. Of course SCL and L&N became The Family Lines which led of course to NS.
I would like to discuss the leadership issue a bit, but it is pretty hard to quantify. There is no doubt that Southern had top notch leadership. It would be very interesting to take a look at them and how they developed their franchise.
Yet another factor that keeps popping up is coal. Carriers with a strong base of coal revenue seemed to have a definate advantage. We know and have discussed the Powder River Basin coal and how it has changed the western railroads. But, NW and C&O were major eastern coal carriers, deriving 40% of their revenues from coal. Southern didnt have the coal, yet seemed to have a more balanced traffic.
We may need to make a distinction between parallel mergers and end-to-end mergers. For parallel mergers, I think the determining factor was which railroad had the most cash and the strongest balance sheet, which is the natural outgrowth of having the best route. In the (parallel) SCL merger, the ACL was dominant because it had the most cash/most traffic/strongest balance sheet because it had the best route (at least between Richmond and Jacksonville).
In the (end-to-end) NS merger, N&W was dominant because it had the most cash/strongest balance sheet because it had coal. The best route was not a factor because the two RR’s didn’t serve the same area, for the most part.
Stuart Saunders was a wise leader of the rail industry when he was at N&W, and exposed as a complete idiot at PennCentral. Does anyone really believe that it was foresight that coal would still support the N&W in 1975, when it was built in the 1850s? Well, then give the credit to where it belongs – the foresight and brilliance of 1850s railroad builders.
Was the SP really brilliantly run in its time, or did California development make it a no-brainer?
Was the ATSF really the best route when it was bankrupt? Or only when it was making money? Did the hollowing out of Northeast industry really mean that railroad executives at the UP, SP and ATF were smarter? Except when UP and ATSF were bankrupt, and SP finally was in free-fall, at which times of course the executive ranks were composed of just plain dumb guys. Right?
Railroading, in my mind more so than any other industry except agriculture, is so entirely and objectively dependent on localized, regionalized, national, and international economic development trends, that subjective efforts to characterize “vision of executives” based entirely on gross performance results, subjectively interpreted, is so ruthlessly subjective as to probably lead to the wrong results as often as it might accidentally lead to an accurate analysis. Might as well use a dart board which is what most railroad hagiography relies on anyway.
N&W is Exhibit A on that argument 1) because of the comparative results of Stuart Saunders at two different railroads, and 2) the reasonable conclusion that a complete idiot could have run the N&W and achieved admirable results based on the evidence that that is exactly wh
I think the Southern Railway was a big beneficiary of changing practices in the steam ship industry–a change that really hurt the Penn Central.
UP simply had the best route.
Given my limited knowledge, I can’t really add too much aside from these fascile contentions.
However, have you thought about addressing the question in reverse? For instance, I think the case of the SP is a great example. In the 70s, the SP was actually, arguably, one of the strongest roads in the nation. It was the direct beneficiary of UP’s route, had lumber reserves that were as lucrative as some coal reserves for other railroads.
I don’t pretend to know all of the reasons that took the SP from juggernaught status to sick man of the industry. But, I think answering this question will shed light on your question.
I think you make, and repeat, a very valid point with regard to multitudes of factors. However, and I am not saying I am right and you are wrong, don’t you think you overly minimize the role of leadership and “guts,” as was described in another recent thread?
For instance, had the IC had the guts of the CNW, it would have spent its Chicago air rights on revitalizing its system instead of pantyhose and muffler companies. Couldn’t you argue that some of the decisions to defer maintanence while waiting for the glacial and sporadic rullings of the ICC was not terribly brilliant leadership. Finally, couldn’t you argue that someone from the SP should have seen the writing on the wall in the late 60s and early 70s and redirected traffic efforts while it still could have?
Don’t get me wrong, I am not asserting your point is mistaken. I guess I just do not see it to the same degree that you do.
Pure luck. Luck that the industries in the area you serve allow you to make money. Luck that the industry is not replaced by overseas producers. Luck that you have access to points of entry which become popular. The luck of being first in laying track on the best route. Luck allows the company to amass enough capitol to be able to grab up what it needs and reacts to changing circumstances. Luck also plays a part in having executives who can understand the changing landscape and anticipate what really will make money, not what sounds cool today.
Gabe, my objection is to these ideas that “something” explains success and failure with broad conclusions substituting for anything resembling underlying analysis. Take a few points you made:
I don’t know anything about either road, but does your comment mean to suggest that if Stuart Saunders really was a genius, and F. Graham Claytor really was a dolt, that their respective reputations are permanently reversed as to their underlying truth in the public mind because of an uncontrollable event outside of the control of both?
To where? It went broke once, with some of the largest land and mineral resources of any private company in the history of the world.
And surely not to the Pacific Northwest where everyone else had a “better” route, excepting only the poor Northern Pacific which, by some strange and inexplicable twist of “best route” irony, carried more traffic to and from the Pacific Northwest than UP, MILW, GN, CN or CP. And, compare UP and NP and MILW – steadily growing during the 1960s – compared to GN – steadily losing traffic and losing ground. Management? Best Route?
Did that mean NP had better managers?
If not, how do you define the “success” that permits any conclusion at all, if not by a measure of traffic success under the most difficult circumstances?
Perhaps NP’s managers have been heretofore unappreciated because a map is a far simpler, if misleading, analytical tool than a “boots on the ground” understanding of the company and how it works. And, in the pantheon of what passes for railroad economic historical revisionism, nobody is going to get any credit for anything&
While we look at the merger/consolidation process as being a product of the 1960’s onward, the reality is that the process began almost from the time the 2nd railroad was chartered. The days of the JJ Hill, Jay Gould, the Vanderbilts, EH Harriman etc. etc. were days of mergers and consolidiations to form what we viewed in the 50’s as Class I carriers. CSX is the amalgam of over 200 prior carriers that formed the B&O, C&O, WM, ACL, SCL, L&N and all the other carriers that now comprise CSX. Each of the other name carriers, UP, BNSF, NS, CN, KCS etc. all have similar corporate histories and hundreds of predecessor companies in their makeup.
Perhaps there is no answer to the question I posed, but it has generated discussion, which is all I wanted. Thanks for your input.
Regarding the bridge carriers…in looking at the Rio Grande, that was a highly successful railroad in the period. Sure, it generated some coal on line, but for the most part it was a bridge carrier, and it did well. Perhaps the rate structures were established which benefitted these types of carriers. Lets face it, there were no pickup adn delivery costs involved with being a bridge.
It is pretty easy to look at NW and see why it was so successful. Lots of coal and most of it hauled downhill.
But two of my favorite lines of the era, Southern and MoPac had little coal, yet did quite well. One could say both were progressive with their leaders of the time, MoPac with their management and information system and Southern with their innovations. Both certainly were lucky in that their territories were ripe for growth.