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Western Railroad Discussion > SP and the SPSF MergerDate: 09/25/17 17:46 SP and the SPSF Merger Author: Northern What were the reasons why the Southern Pacific wanted to merge with Santa Fe that would create a very dominant rail system in the Southwest in the 1980s? It seems that the SP had to sell their souls to the Santa Fe in the form of much of their non-rail assets to be turned over to a new holding company called Santa Fe Southern Pacific Corporation ultimately controlled by the Santa Fe. In addition, the SP itself was operated in a trust while the ICC reviewed the merger. When the ICC ruled against the merger, the Southern Pacific was the odd one out with its rail assets sold to the D&RGW minus their non-rail assets. Why did the SP want to do a merger with Santa Fe in the first place, and why did they agree to such terms? Did SP ever consider merger with either the Union Pacific, Burlington Northern or Missouri Pacific in and around the same time period instead of the Santa Fe? Was the reason to merge with the Santa Fe stem from SP's and UP's inability to break up the Rock Island in the 1960s? Did they have a "Plan B" if the Rock Island breakup failed? Would there have been an SPSF merger attempt if SP acquired the Tucumcari line via a line sale west of Kansas City in the mid to late 1970s during Rock Island's bankruptcy? What concessions were the Santa Fe and the SP offering if any to any other network if any?
Date: 09/25/17 18:12 Re: SP and the SPSF Merger Author: SanJoaquinEngr In the Los Angeles area the SP controlled 60 percent of the traffic. Followed by the Santa had 30 percent and UP 10 percent. Both RR s in the area were deadend.. their lines ended in LA. The merger with the ATSF and SP would of been a monoply. If the BN and UP had mergered then the traffic would have been mostly in the Midwest and the PNW... ( grain, coal, piggybacks, etc). Believe the route to Chicago by rail on the two lines is only a difference of 18 miles. Since the assets of the SP and SF non railroad interests merged therefore the railroads should of mergered.
The SP out of LA had 4 way to go west, east, North and south. There are many contributors on TO that are much more eloquent than myself that were part of the merger case, i.e. Norm (aronco). Maybe these members can elaborate. I was just on the sidelines from the SP side of the LA River. Posted from Android Date: 09/25/17 18:23 Re: SP and the SPSF Merger Author: bradleymckay Northern Wrote:
------------------------------------------------------- > What were the reasons why the Southern Pacific > wanted to merge with Santa Fe that would create a > very dominant rail system in the Southwest in the > 1980s? It seems that the SP had to sell their > souls to the Santa Fe in the form of much of their > non-rail assets to be turned over to a new holding > company called Santa Fe Southern Pacific > Corporation ultimately controlled by the Santa Fe. > In addition, the SP itself was operated in a > trust while the ICC reviewed the merger. When the > ICC ruled against the merger, the Southern Pacific > was the odd one out with its rail assets sold to > the D&RGW minus their non-rail assets. Why did > the SP want to do a merger with Santa Fe in the > first place, and why did they agree to such terms? > Did SP ever consider merger with either the Union > Pacific, Burlington Northern or Missouri Pacific > in and around the same time period instead of the > Santa Fe? Was the reason to merge with the Santa > Fe stem from SP's and UP's inability to break up > the Rock Island in the 1960s? Did they have a > "Plan B" if the Rock Island breakup failed? Would > there have been an SPSF merger attempt if SP > acquired the Tucumcari line via a line sale west > of Kansas City in the mid to late 1970s during > Rock Island's bankruptcy? What concessions were > the Santa Fe and the SP offering if any to any > other network if any? You would be better off posting this on the Nostalgia Board. That's a ton of questions to answer at one time but here are some highlights, in no order: 1) SP (the railroad) was heavily tied to the economic conditions of the country as a whole. They had minimal coal and grain traffic. 2) SP had, largely, an unfavorable route structure, especially post 1980 Staggers Rail Act (beginning of deregulation). 3) UP/MP/WP merger put pressure on Santa Fe and SP to counter the "MOP UP". 4) The first SP/Santa Fe merger talks were terminated in August 1980, only to resume later. 5) Santa Fe management was against SP's 1980 purchase of RI's Golden State Route (for purely selfish reasons, IMHO). 6) If SPSF had gone though UP would have received "overhead" trackage rights from El Paso to Colton. They would likely have purchased the GSR from SPSF at a later date. Allen Edited 4 time(s). Last edit at 09/25/17 18:57 by bradleymckay. Date: 09/25/17 19:14 Re: SP and the SPSF Merger Author: millerdc Prior to this was the failed merger of ATSF & WP of which politics must have something to do with its failure.
Date: 09/25/17 19:37 Re: SP and the SPSF Merger Author: bradleymckay SP was, in many ways, a different railroad after 1973. The deep economic recession of 1975 knocked the snot out of SP, which came just 2 years after booming traffic growth. By 1978 it was a boom again and SP was just not able to properly handle it. By early 1980 the country was in recession again and traffic declined.
It was little wonder why SP upper management focused on the subsidiaries for earnings growth in the late 1970's, especially if you consider how slow the then ICC (Interstate Commerce Commission) approved rate increases to offset rising costs (ie. diesel fuel and labor). A good book to read is Fred Frailey's "Blue Streak Merchandise"... Allen Edited 3 time(s). Last edit at 09/25/17 19:55 by bradleymckay. Date: 09/25/17 20:57 Re: SP and the SPSF Merger Author: SN711 Among other things, wasn't the SP-SF was dead set against giving any trackage rights away to other railroads, which helped lead to the downfall of the merger?
Everyone wanted a trackage rights piece on the SP-SF. I believe the D&RGW wanted trackage rights into Oakland over Donner. Gary Date: 09/25/17 21:17 Re: SP and the SPSF Merger Author: mrsaxtonsr The Santa Fe's Terminus was Richmond CA (across the bay from San Francisco and Marin County) and The SP end-point has always been San Francisco, at least on paper.
The SP line ran north up the west side of the San Joaquin Valley to Sacramento while the Santa Fe had the East side, so combining the two would give the SP-SF a 100% monopoly. In the north, the SP had the West side of the Sacramento Valley the WP had the East-side at least between Sacramento and Oroville. Beyond that, there wasn't much on either side of the Valley to Redding and Dunsmuir and Weed. Then you make a decision. Go north over the Siskiyou's or north-east to Klamath Falls. There was ATSF-WP-BNSF cooperation on the I-5 corridor between Seattle and LA but SP had a much better route. Date: 09/25/17 22:08 Re: SP and the SPSF Merger Author: TheNavigator SP approached UP in the mid-1970s. In 1976, Ben Biaggini (Chairman of SP) approached John Kenefick (President of UP) with a proposal that the two roads work together. After analyzing the present condition and business outlook of the SP, UP concluded that, while Kenefick had been enhancing the UP, Biaggini had been running SP into the ground. (Source: "Union Pacific, The Reconfiguration: America's Greatest Railroad from 1969 to the Present" by Prof. Maury Klein, 2011. Highly recommended reading, as it covers the various merger studies and actual mergers for the period identified in the title).
GK Edited 2 time(s). Last edit at 09/25/17 22:28 by TheNavigator. Date: 09/25/17 22:20 Re: SP and the SPSF Merger Author: mearsksealand I always heard the UP had better political influence in Washington than the Santa Fe andSP and this lead to the rejection of the merger
Dale Smith Posted from iPhone Date: 09/26/17 00:09 Re: SP and the SPSF Merger Author: funnelfan From 1952 until 1972 Donald J Russell ruled the SP in a way that might make Darth Vader envious. DJR was very much a railroad man, literally sleeping and eating while listening to telephone lines and would answer with the mere mention of his name. But his dedication kept the SP ship in order during the 50's and 60's when other railroads started to fall apart. Unfortunately his hand picked successor, Benjamin F. Biaggini, was not so keen on the railroad. BFB started taking over from DJR by 1969 when the railroad was scooted out of the way into the Southern Pacific Transportation Co so the parent company, Southern Pacific Inc, could diversify. Diversification was a big deal among railroads in the 1970's who saw the railroad as a failing venture and wanted to siphon money from the railroads into more profitable ventures. Very soon pipelines, fiber optic cables and microwave stations were installed along SP routes. Management was distracted from the railroad on top of dis-investing in it, little wonder SP started to fall apart. The early 1980's recession hammered the SP hard, and the Mop-UP merger (MP-WP-UP) wasn't helping matters. Mergers were everywhere, including some notable side-by-side mergers like the Penn Central, B&O+C&O, ACL+SAL. The ATSF wasn't doing very well either, so the management at SP and ATSF thought they could pull off a side-by-side merger. They were so confident in the plan they merged the parent corporations and started painting signs and equipment (including locomotives). They also stonewalled any concessions to competitors (they back tracked here on the second application....but it was too little too late). Of course the rest of the world including the ICC saw that such a merger was going to put a lock on California and the Southwest. The failed merger led to a lot of trouble for both railroads. The SP floundered under DRGW and lacked direction, and the ATSF, newly enriched with the non railroad assets of the SP became the target of hostile takeover attempts, and ended up selling off many of those assets in a hurry to defeat the takeover attempts.
Ted Curphey Ontario, OR Date: 09/26/17 06:39 Re: SP and the SPSF Merger Author: colehour mearsksealand Wrote:
------------------------------------------------------- > I always heard the UP had better political > influence in Washington than the Santa Fe andSP > and this lead to the rejection of the merger > Averell Harriman was at one time chairman of the UP and also had many connections in Washington. It may be that he influenced the decision, but that's only speculation on my part. Date: 09/26/17 11:05 Re: SP and the SPSF Merger Author: TCnR We had some really interesting discussions on this a few years ago, Biaggini had the intention of leveraging the Corporation in non-RR directions with the idea that the RR profits had been developed as far as possible. The RR funded a huge number of what we would call 'start-ups' or spin-off projects with the intention of making more profit than the RR could produce. There are some interesting posts around the time of BFB's passing that reinforce that as well as some of his speeches and early attempts at mergers noted in texts like
"Main Lines: Rebirth of the North American Railroads, 1970-2002 by Richard Saunders Jr.". Basically the idea was to dump the RR and make money with modern business developments. As hobbyists we often overlook the Telecomm Company called SPRINT, which eventually moved over to Phil Anschutz. The RR's have a tremendous asset in the sense of continuous right of ways which allowed competitive copper wire transmission lines and eventually fiber optic lines which enables a large part of today's Internet and Media connectivity. Not fully realizing that at the time, the main effect of the SPSF merger was stripping the Land Grants and subsequent Real Estate holdings from the SP. Pretty much left the SP Corp as a shell, which made what was left an easy purchase for Phil Anschutz and the Rio Grande Holdings. From those posts and various books UPRR had a strong presence in RR Law and could effect National decisions. The story goes that all those folks retired long ago, once again a totally different Corporate presence now. Biaggini Obit post: Date: 06/02/05 16:23 Ben Biaggini, "railroad man to the core" https://www.trainorders.com/discussion/read.php?1,933771,933771#msg-933771 Edited 1 time(s). Last edit at 09/27/17 10:30 by TCnR. Date: 09/26/17 16:45 Re: SP and the SPSF Merger Author: Northern millerdc Wrote:
------------------------------------------------------- > Prior to this was the failed merger of ATSF & WP > of which politics must have something to do with > its failure. What were the reasons the Santa Fe was unable to merge with the Western Pacific? Would have been interesting to see how much bridge traffic would have flowed from the ATSF in Pueblo via the D&RGW to the WP in Salt Lake City. Date: 09/26/17 18:06 Re: SP and the SPSF Merger Author: Lackawanna484 Union Pacific has always been well represented in DC, and in the state capitals. There's a lot to be said for having legislators and regulators who understand your point of view and your needs.
Politicians tend to be aware of entities which employ lots of people in their district, and have an active political engagement. Having 25 registered lobbyists in DC helps, too. Per Open Secrets, BNSF's parent has 73 lobbyists in DC. Date: 09/26/17 18:12 Re: SP and the SPSF Merger Author: bradleymckay Here are some more informational tidbits:
May 15, 1980 - on the day SP was conducting it's annual stockholder meeting in NYC it was announced SP Transportation Company and Santa Fe industries would merge. The new company would be called Santa Fe Pacific Industries, INC. The merger agreement was suddenly called off 3 months later (August). March 23, 1984 - Santa Fe Southern Pacific Corp filed it's application to fully merge the 2 companies with the ICC. September 22, 1986 - the day a non-binding agreement was reached allowing D&RGW to lease the SP Overland Route Ogden to Roseville and the Modoc Line to K-Falls. D&RGW would be granted trackage rights from K-Falls to Portland and Roseville to both Bakersfield and Oakland. Of course this agreement came AFTER the ICC denied the SPSF merger in July. The new agreement would only go into effect if the ICC allowed the SPSF merger. June 30, 1987 - date ICC refused to reopen the Santa Fe - SP merger application. Allen Edited 6 time(s). Last edit at 09/26/17 18:21 by bradleymckay. Date: 09/26/17 19:48 Re: SP and the SPSF Merger Author: ShastaDaylight This is a great discussion, which brings back lots of not-so-happy memories of watching what was just a couple of years earlier America's wealthiest railroad go rapidly down the tubes... And I got to see part of this drama while working at One Market Plaza in San Francisco - SP HQ... Let me share just a few memories, observations if you will that speak volumes of how far SPTCo. (the railroad) fell...
In July of 1973 SP produced a fine, all color magazine entitled "This is Southern Pacific." Of course SP's corporate diversity was well illustrated, but so was the railroad, which was still doing well that summer so long ago. As the "Mad Dog" chronicles described so well a few years back, West Oakland had tons of switching activity, and it was rare that mainline freights didn't roll past 16th Street Station several times each hour plus the locals and switch jobs. Skip ahead one year to July of 1974, when I spent from 2:00 PM until almost 10:00 PM at 16th Street (waiting for a late-running north "Starlight" for a trip to Seattle). During all of that time, only one freight came through next to Desert Yard (and that was just before the Starlight)and one test train came by around 4:00 PM. A couple of switch jobs rumbled by over in the yard and that was it! The economy was down that summer, but I had never seen SP that dead going clear back to the 1950's! As a result of this economic downturn SP stored locomotives and cars with abandon, and cut way back on railroad maintenance. Mr Biaggini and company were very much afraid of the SP Board and stockholders, so they sold off many prime real estate assets clear into 1976/77 to prop up the railroad and continue paying dividends. (Internally we called it the "fire sale...") The cardinal rule in railroad real estate was that you NEVER sell land unless it is for a major long-term rail shipper; well that went out the window during this time costing SP future rail freight business. UP, Santa Fe and BN all suspended dividends in 1975 and also stored equipment. However, SP did not store many of its diesels properly, so when business boomed in 1976 they were stuck with engines in need of costly repairs. Much of the early GE fleet succumbed as a result of this debacle. Those other big western railroads bounced right back in 1976, but the SP never did come all the way back, and carried with it the effects of its top level decisions right into the late 1980's. (This resulted in the ICC mandate on motive power which put the SP commute diesel fleet in freight service and Amtrak P30CH diesels on the commute trains during the summer and fall of 1978.) Southern Pacific was a railroad I loved and was always proud of right up until 1974. I still loved the SP after that, but it was never the same robust railroad it had been up to 1973... There is much more to this story as so many of you have shown and shared, but I thought a few of you might find what I shared of interest... ShastaDaylight Date: 09/26/17 21:44 Re: SP and the SPSF Merger Author: SOO6617 colehour Wrote:
------------------------------------------------------- > mearsksealand Wrote: > -------------------------------------------------- > ----- > > I always heard the UP had better political > > influence in Washington than the Santa Fe andSP > > and this lead to the rejection of the merger > > > > Averell Harriman was at one time chairman of the > UP and also had many connections in Washington. It > may be that he influenced the decision, but that's > only speculation on my part. W. Averill Harriman was the political figure, but it was his brother E. Roland Harriman who was the Chairman of the Union Pacific RR until 1978. Your point does stand about influence in Washington DC. Date: 09/27/17 10:46 Re: SP and the SPSF Merger Author: bradleymckay TheNavigator Wrote:
------------------------------------------------------- > SP approached UP in the mid-1970s. In 1976, Ben > Biaggini (Chairman of SP) approached John Kenefick > (President of UP) with a proposal that the two > roads work together. After analyzing the present > condition and business outlook of the SP, UP > concluded that, while Kenefick had been enhancing > the UP, Biaggini had been running SP into the > ground. (Source: "Union Pacific, The > Reconfiguration: America's Greatest Railroad > from 1969 to the Present" by Prof. Maury Klein, > 2011. Highly recommended reading, as it covers > the various merger studies and actual mergers for > the period identified in the title). > GK Biaggini can at least be credited with 2 things: 1)having enough foresight to see the benefits of a transcontinental merger with SCL (think about how the railroad landscape would look today). 2)buying RI's Golden State Route for $57 million, when it may have been worth twice that amount. Allen Edited 1 time(s). Last edit at 09/27/17 10:47 by bradleymckay. |