Thoughts on EL Merger

Discussion relating to the Delaware, Lackawanna & Western, the Erie, and the resulting 1960 merger creating the Erie Lackawanna. Visit the Erie Lackawanna Historical Society at http://www.erielackhs.org/.

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Thoughts on EL Merger

Postby Engineer Spike » Thu Jun 29, 2017 11:05 pm

The other night I was having a conversation with another frequent poster here. We often talk about mergers past, present, and future. The topic of EL came up. Erie didn't really need the Lackawanna. Merging it gave Erie more market penetration, especially in Pa, and the Southern Tier. They were also able to combine the eastern terminal, and parallel lines, especially Binghamton to Buffalo. On the other hand, it gained a much more complex passenger operation, in NJ. It also gained more access to NE Pennsylvania, which was already over saturated.

Here is the major question. Did Erie want to kill some competition? Look at the C&NW-CGW merger. On the other hand, did they do it to keep someone else out? Nickel Plate refused to merge, due to Lackawanna's poor financial state. If it was allowed to fail, could Nickel Plate have picked it up in a fire sale? If that happened, might Lackawanna have been able to cut commuter service, and facilities, under federal bankruptcy protection? The resulting merger would have certainly made a better system, than the Erie had. NKP served more industrialized sections of OH, and IN, and also served St. Louis.

Let me know what you think about this theory.
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Re: Thoughts on EL Merger

Postby Cactus Jack » Fri Jun 30, 2017 8:49 am

If you haven't read the Wyer Dick reports on the EL merger study, that is a good place to start. I've found it on the internet but not sure where. Printed it out years ago. It gives the reasons the DL&W and Erie thought merger a good idea and how they would achieve cost savings and where. It also projected the new traffic flows and lanes and changes in interchanges. Originally the D&H was going to be the third party. Both Erie and DL&W worked together on the east end, as evidenced by the consolidation of commuter facilities at Hoboken as both edged towards precarious financial positions and the crush of competition in the east as well as proposed NYC - C&O mergers and the N&W moving to take the Wabash and NKP and PRR looking for a mate etc. My understanding was the savings in the terminal facilities on the east end and a combined company that leveraged the best of the DL&W and Erie. For instance DL&W traffic would come west on Erie (EL) instead of NKP. Shop, yard and train consolidations would save money and make the EL system more competitive, especially over Buffalo.

DL&W owned a fair share of NKP stock and was probably the natural merger partner with DL&W as the NKP stopped in Buffalo and the DL&W only went west to Buffalo. Lots went wrong with that merger proposal and about 1959? DL&W sold off the big block of NKP stock. NKP (N&W) then preferred the LV as their east end connection. I doubt there was much value to the NKP of the Erie, especially compared with the DL&W or using the LV. Too much overlap of Erie which favored the NKP lines. NKP went direct and fast Buffalo to Cleveland and on to Chicago and had direct St. Louis access and better connection to Detroit for autos and especially after N&W consolidated Wabash and NKP. There would not have been need for much of the EL west of Youngstown and for that matter there would have been ways to serve the Mahoning Valley without Meadville, Corry, Jamestown and most of the line across the Tier (Cuba Jct - Wellsville to Hornell).

The Erie Delaware Division was pretty sparse compared to the DL&W as EL realized in late years. DL&W was pretty strong financially through at least 1952 but dropped drastically in the recession of 1958. Erie was just plain weak. I don't think there was any way the PUC's would have let Erie or DL&W drop commuter. Remember the CNJ was bankrupt and still forced to operate commuter. Times were not yet ripe for that and it was certainly an issue with NKP who brought in Lynn White to scuttle any merger with DL&W after John Davin died and White moved to NYC in 1952 putting PMS in charge.
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Re: Thoughts on EL Merger

Postby Engineer Spike » Sat Jul 01, 2017 10:14 pm

Thanks for the tip. I read a piece, which critiqued the merger study. It talked about the new markets, which resulted from Lackawanna's deeper entrenchment, of the Scranton area. This article said that most of the savings were already being realized before the merger. This was due to the consolidation of passenger operations, in Hoboken, and the parallel lines west of Binghamton. The merger created a loss of traffic. Much of the traffic from NKP was rerouted to LV. I think this was mor important, than the short hauls, which were achieved, with better connections to RDG, and CNJ.

Erie was not in great shape, but had a much better chance of making in, while remaining separate. Lackawanna was just another Hudson River, to Buffalo line. This is why I think that they might have been picked up, by a western road, which might be a bigger threat to Erie. NKP, and Wabash come to mind. GT/CN is a less likely possibility.
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Re: Thoughts on EL Merger

Postby Cactus Jack » Sun Jul 02, 2017 8:09 am

There were certainly issues with the projections as you have mentioned.
If memory serves there was an initial report and an updated report, but account of many factors, some legit and others political or just due to whatever factors many of the merger savings and consolidations projected either did not happen or were not implemented. By late 1962 the merged EL was in deep trouble and ex DL&W President White came back in 1963 to try and focus on making it work. Basically he had some success but died 3 years later and in a whole new and emerging business environment. The N&W had expanded and taken over the Wabash and NKP, PRR had divested of N&W, NYC and PRR were talking merger as NYC's Perleman realized his dream of merging with C&O was not going to work. C&O was coupling with B&O and looking at new alliances. White was very big on getting into the N&W family as survival. By 1966 the Wyer Dick study world was ancient history.

One questions could be asked is that in Dereco days why didn't Fishwick promote more consolidation between EL lines and N&W lines west of Cleveland / Akron area. I'm not sure I know; perhaps unions, political environment, government regs and the goals of parent N&W as opposed to step-child Dereco.
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Re: Thoughts on EL Merger

Postby Engineer Spike » Sun Jul 02, 2017 10:24 pm

In the book The Men Who Loved Trains, Fishwick is quoted as saying, everything east of Buffalo, and Pittsburgh is a sinkhole. This, and EL's debt, lead to keeping EL at arms length, through Dereco. I think that the Wabash, and Nickel Plate lines had enough capacity. I'm just surprised that N&W didn't try to kill EL, just as Northwestern did to Great Western, and M&StL.
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Re: Thoughts on EL Merger

Postby ExCon90 » Mon Jul 03, 2017 3:10 pm

Around that time Fishwick was quoted as speaking of building a "firewall" from Buffalo to Pittsburgh and wanted nothing to do with anything east of there.
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Re: Thoughts on EL Merger

Postby Greg » Thu Jul 13, 2017 7:40 am

The Lackawanna was doomed, although they did not know it, when their proposed merger with the Nickel Plate did not manifest in the 1920's. Playing the 'what if' game a merger with the NKP could have easily led in the 60's to a merger with N&W or the C&O.
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Re: Thoughts on EL Merger

Postby Engineer Spike » Thu Jul 20, 2017 9:35 pm

I see your point, Greg. N&W, more so than C&O (because of PM purchase for Midwest access) would have needed a merger partner. Still, those two roads had ample supply of online traffic, mainly coal.

No matter what, there were just too many lines. All was well until local traffic dried up. We can ponder to infinity all of the possible combinations. It all boils down to what would be consolidated. This could be by merging, the. abandoning the less desirable lines, like my C&NW-CGW example, or government intervention, such as Conrail.
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Re: Thoughts on EL Merger

Postby Greg » Sun Jul 30, 2017 10:41 am

Engineer Spike wrote:I see your point, Greg. N&W, more so than C&O (because of PM purchase for Midwest access) would have needed a merger partner. Still, those two roads had ample supply of online traffic, mainly coal.


I agree the N&W would have been the more attractive partner, they were slightly interested prior to Conrail. A somewhat healthy DL&W/NKP system would have been a good fit for them, opening up Chicago and New York (and to an extent, New England). They would have still needed a partner that reached into Philly and Pittsburgh.
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Re: Thoughts on EL Merger

Postby Engineer Spike » Sun Aug 13, 2017 8:50 pm

B&O would have fit this bill, They were poor, but one can see why C&O snapped them up.
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Re: Thoughts on EL Merger

Postby Greg » Mon Aug 14, 2017 9:07 am

Engineer Spike wrote:B&O would have fit this bill, They were poor, but one can see why C&O snapped them up.


There would have been a good deal of redundancy in that merger with Buffalo, Rochester, Cleveland, Detroit, Chicago, St. Louis and most of Ohio. I think for the easterns end to end mergers were the only real feasible long term strategy so they could produce long haul revenue like the big westerns.
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Re: Thoughts on EL Merger

Postby s4ny » Tue Oct 24, 2017 9:45 am

Erie, DL&W, NY Central, PRR, Lehigh Valley, Reading, CNJ, all had to go bankrupt
for the pieces to survive.

States bled the companies with commuter operations until there was no blood left.

Taxes would not be lowered as long as companies could pay.

New highways were siphoning off freight.

Eliminating redundant trackage was excruciating.

Crew rules were outdated.

Coal was dead or dying.

Remember, the strongest swimmer on the Titanic probably drowned.
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