Eastern Railroad Discussion > Happy Birthday, Penn Central!

50+ plus years later and we are learning a new term: PSM (Precision Stock Manipulation)

The Penn Central Transportation Company, commonly abbreviated to Penn Central, was an American Class I railroad headquartered in Philadelphia, Pennsylvania, that operated from 1968 until 1976. It was created by the 1968 merger of the Pennsylvania and New York Central railroads. The New York, New Haven & Hartford Railroad was added to the merger in 1969; by 1970, the company had filed for what was, at that time, the largest bankruptcy in U.S. history.

Penn Central (PC) came into existence on February 1, 1968. On that date, the PRR — the nominal survivor of the merger — changed its name to Pennsylvania New York Central Transportation Company. It adopted the name Penn Central Company on May 8, 1968. On October 1, 1969, it again changed its name, to Penn Central Transportation Company, and became a wholly owned subsidiary of a new Penn Central Company, a holding company.

The ICC approved the merger on the following conditions:

    The new company had to take over the freight and passenger operations of the New York, New Haven & Hartford Railroad (NH). That occurred on December 31, 1968.
    PC had to absorb the New York, Susquehanna & Western Railway (NYS&W). PC and NYS&W could not agree on a price, and eventually NYS&W became part of the Delaware Otsego System.
    PC had to make the Lehigh Valley Railroad (LV) available for merger by either N&W or C&O or, if neither of those railroads wanted it, merge it into PC. LV struggled along on its own and entered bankruptcy only three days after PC did.

The merger was not a success. An implementation plan was drawn up, but not carried out. Attempts to integrate operations, personnel and equipment were unsuccessful, due to clashing corporate cultures, incompatible computer systems and union contracts.[3]:233–234 Little thought had been given to unifying the two railroads, which had dramatically different styles of operation. In the decade prior to the merger, the NYC had trimmed its physical plant and assembled a young, eager management group under the leadership of Alfred E. Perlman. The PRR, headed by Stuart T. Saunders, had been a more conservative and traditional operation. Many of NYC's management people (known as the "green team") saw that the PRR (the "red team") was dominant in PC management and soon left for other positions. Those who departed had often said the different corporate philosophies (PRR said they were in the transportation business, while the NYC stated they were in the railroad business) could never have merged successfully.

In addition to the problems of unification, the industrial states of the northeast and midwest were fast becoming the rust belt. As industries shut down and relocated, railroads found themselves with excess capacity. The PRR was worse than practically every other railroad in having four to six tracks where one or two would do — track that was no longer needed but which was still on the tax rolls. West of the Allegheny Mountains, NYC and PRR duplicated each other at almost every major point; east of the Alleghenies, the two hardly touched. Railroad historian George Drury commented that the merger resembled "a late-in-life marriage to which each partner brings a house, a summer cottage, two cars, and several complete sets of china and glassware — plus car payments and mortgages on the houses."

Subpar track conditions deteriorated further, a result of inheriting decrepit facilities. Trains regularly operated at greatly reduced speeds, resulting in delayed shipments, excessive overtime accrued, and soaring operating costs. Derailments and wrecks were regular occurrences, particularly in the Midwest.[4] In 1969, most of Maine's potato production rotted in the PC's Selkirk Yard, hurting the Bangor & Aroostook Railroad, whose shippers vowed never to ship by rail again.

PC's holding company tried to diversify the troubled firm into real estate and other non-railroad ventures, but in a slow economy these businesses performed little better than the railroad assets. In addition, these new subsidiaries diverted management attention away from the problems in the core business. Management also insisted on paying dividends to shareholders to create the illusion of success. The company had to borrow additional funds to maintain operations. Interest on loans had become an unbearable financial burden...  and so on and so on....

https://drive.google.com/file/d/1SCGxa1r9lMtl9wc5yLqJZ0muSWXeeAin/view?usp=sharing

 

People will read about this for thousands of years and learn nothing.......

I remember the date well as I turned 15 years old on February 1, 1968!
Yes, it's my birthday. And than in November of 1975 I hired on the Penn
Central Railroad as a trackman! The book entitled, "The Wreck of the Penn Central"
is recommended if that is of any interest to anyone here.

The Maine potato fiasco also signaled another opportunity for Idaho potato growers to jump into the eastern market.  Although Idaho was already a major player, they grabbed this, and never looked back.

Great post that summarizes the Penn Central story. Another read that goes into great detail, "The Men Who Loved Trains"...The Story of Men Who Battled Greed to Save an Ailing Industry.. by Rush Loving Jr.  Was a Christmas present this past year and I found it fascinating and could hardly put it down. Read it twice and especially liked the Conrail story and the split up Of Conrail between NS & CSX. If you like to really get into the business end of American Railroads...a must read!!!
Again great post.
 Thanks

Phil Maton
Villa Rica, GA



Edited 1 time(s). Last edit at 02/01/19 13:26 by NSSpike.