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OHDELA's Student-run School News Outlet
Penn Central, the Worst Railroad Ever
Following the end of World War 2, railroads were in trouble. The car and airplane were gaining popularity. Airplanes were stealing passengers from long-distance passenger trains, while the car was stealing short-distance railroad traffic and soon after short distance freight traffic. With over-regulation from the Interstate Commerce Commission, it was making the situation worse because the war was over. Coal and steel demand dropped dramatically. The industry was falling apart, smaller railroad companies rapidly merged with examples such as The Erie Railroad, The Delaware Lackawanna, and The Western Railroad merging to form Erie Lackawanna.
Seeing the writing on the walls, Stewart T. Saunders (President of the Pennsylvania Railroad) attempted to merge with the Norfolk And Western Railroad. Around this time Alfred E. Perlman (president of the New York Central Railway) attempted to merge with the Baltimore and Ohio Railway an alliance that would then let the New York Central merged with the Chesapeake and Ohio Railroad. However, the attempted mergers made by Saunders and Perlman both fell apart. The Pennsylvania Railroad-Norfolk And Western merger failed because when Norfolk and Western learned how much debt the Pennsylvania Railroad was in, the N&W backed out of the deal in fear of drowning themselves in debt. The New York Central and Baltimore and Ohio filed to the Interstate Commerce Commission to approve the merger. The ICC ruled against the New York Central, Baltimore, and Ohio saying it was a monopoly. Then, they instructed Pennsylvania Railroad and New York Central to merge their companies.
Around this time, the Chesapeake and Ohio Railroad bought the Baltimore and Ohio Railroad. On February 1st, 1968 at 12:01 am The Penn Central Transportation Company, all of the equipment (locomotives and freight cars for example) only said Penn Central. One thing I wanted to bring up was the Pennsylvania Railroad and New York Central Railway hated each other. Both had thousands of miles of parallel routes meaning that Penn Central had double the freight cars that they needed, also these companies had incompatible car tracking systems. That went as well as you would think. Freight cars were often assigned to the wrong trains. A train from Albany, NY to Pittsburgh, PA could have had freight cars that were supposed to go to Harrisburg, PA and Harrisburg is three hours east of Pittsburgh by car. There is this one story where a mile-long coal train went missing for a week without Penn Central knowing. Let me repeat that, a mile-long coal train went missing for a week.
By Ryan Birkhimer, Student Reporter
On top of that Penn Central also made a series of bad investments. These investments included investing $45 million dollars into the metro liner passenger sets which were supposed to run at 150 mph. In reality, the electronic systems were extremely unreliable and on a good day, they ran at 125 mph. Don't forget, passenger service was in decline. They had also invested in the restate industry which backfired.
Around this time Penn Central’s financial advisor (formerly Pennsylvania Railroads financial advisor) David C. Bevin embezzled approximately 21 million dollars of Penn Central funds. (An amount worth about eight billion dollars today) All of this would be covered up by Saundards. Saundards and Bevin also made false financial reports. This was interesting because they only reported what made Penn Central a profit. Everything else wasn't in the financial reports. In June 1969, Penn Central swallowed New York, New Haven. Hartford Railroad only accelerated the collapse of Penn Central. The New Haven Railroad first went bankrupt when in 1929 following the stock market crash. The New Haven Railroad would then be in and out of bankruptcy several times. Haven's main form of income came from short-distance freight and passenger revenue.
On Tuesday, July 21st, 1970 Penn Central officially declared bankruptcy sending shockwaves across the industry. A shock wave that can be felt over 50 years later and will probably be felt forever. However, Penn Central would continue to decay. A possible loan was offered to Penn Central one of the terms was Perlman had to be fired. A few days later when Perlman was officially fired, terms were changed that Bevan and Saudars would also be fired. Penn Central a company that was formerly the largest transportation company (Penn Central was outclassed by Burlington Northern on March 2nd, 1970) was now declaring bankruptcy. The ICC still did very little to deregulate the railroads.
On May 1st, 1971 a new company called Amtrak took over all of Penn Central's passenger operations. However, while this was a positive change for Penn Central, a new problem stuck. Between June and July of 1972 hurricane Agnes hit the Northeast. It was at the time, the most costly hurricane in history costing 2.1 billion dollars in damages in 1972 money. One-third of Penn Central's locomotive fleet had to be inspected for water damage, also trackage was washed away and it made Penn Central lose revenue. In 1973 the Regional Rail Reorganization Act was passed in an attempt to save Penn Central, Erie Lackawanna, and smaller railroads such as Reading Company. However, the act only made Penn Central’s situation worse. Later on, in the year of 1973, the government declared Penn Central unrecognizable. The following year in 1974, Penn Central made a film begging for help and showed it to the government.
(The film is on Youtube, I’ll put the link at the very end.) At the start of the film a former Pennsylvania Railroad boxcar derails and the government writes to Penn Central asking if the boxcar derailment was staged, Penn Central responds with “That derailment was not staged, that is how often are trains derail. Please help us” in 1975 the Consolidated Rail Corporation act was passed and six railroads were legally required to operate until April 1st, 1976. I actually talked about three of those companies they were: Penn Central, Erie Lackawanna, Reading Company, Central of New Jersey Railroad, Lehigh Valley Railroad, and the Ann Arbor Railroad. Conrail took over operations of all six of those railroads on April 1st, 1976 and Conrail would operate until June 1999 when the company was split in half by CSX (successor of the C&O and B&O) and Norfolk Southern (successor of the N&W) and Conrail can still be seen to this day on boxcars, autoracks, coil cars, and more.
