EL: What If The Hurricane Never Happened

[NYC27]

I can't imagine the EL completing a successful reorganization. The 1981 recession would have been too devastating. EL was a steel road at heart, most of their biggest customers lay between Meadville and Cleveland - one of the areas hit hardest by big steel's decline.

The peak year for steel production in the US was 1973. At this point EL was planning to reorganize on its own. By early 1975 the steel industry was way off and the trustees changed their minds and joined CR. Smart move as this was just the beginning, plants started closing in Youngstown in 1977 and by 1982 the industry was just a shadow of its former self in this area. IIRC one of the trustees of the EL worked for Republic Steel, EL's biggest shipper, I think he saw what was about to happen to the traffic base.

In addition to the steel, Ford Mahwah was closed in 1980. George Elwood has a list of their largest 26 customers on the lines to be sold to Chessie - of these 17 have closed, including 14 of the biggest 17 and most of the other 9 are no where what they once were. I can see a Rock Island style ending where cash ran out and the road was simply liquidated.

If they were to be acquired intact, inclusion in Guilford would have been the most likely scenario for a restructured EL. N&W owned it and cast it off and Chessie walked away from a chance to buy so you can count both of them out. GTI's management is the only one I can picture successfully going after the labor agreements - they would have made a mess of things in the process but it would have been a necessary step for the company's survival.

In an unrelated note - NS still provides intermodal service between Croxton and the ex-EL 51st Street in Chicago (today it is considered part of the adjacent 47th Street Yard) sadly it involves not one mile of the EL mainline.

[henry6]

Total supposition on my part: The EL might have been able to survive not on its own but with other supports. Penn Central proved that the NYC-PRR marriage was not the panacea to northeast railroading. But by killing off the competition, i.e. D&H, EL, LV, CNJ, RDG, LHR, cherry pick the lines and branches of all 7 railroads, not allow NS or CSX entities interfere, then it would succeed, and did as Conrail. Should the USRA, and others, have not been blinded by "saving PC" or by "PC was eastern railroading", then perhaps things could have been better for the EL, et al. There could have been a more concerted effort to forge another eastern system at that time would have taken in DERECO (EL-DH) plus B&M including LV/CNJ/RDG appendages. It would have been a system surrounded by the PC remnant with a main line running parallel and between both the Keystone and Water Level routes; it would have gotten to Montreal, Boston, NY, Philadelphia, Harrisburg, Albany, Buffalo, Cleveland, Chicago. It could have provided quality, honest competition to the PC forcing the PC to be better or to eventually force PC to give over the Water Level route to the EL franchise while CSX, or more probably NS, get the Keystone Route. While Conrail has to be considered a success in its own right, it did a lot to destroy communities and route structures off the PC corridors. Maybe I have stated it too strongly, but I think if there had been another railroad structured around the EL and its connections, many communities in the east would have better industrial bases.

[Matt Langworthy]

Henry, you aren't stating the case for EL too strongly.

Chessie would've taken EL (except the western end) if all 20 unions had agreed but alas only 12 of them did... despite efforts by Chessie all the way until March 22, 1976.

ATSF also considered a merger but apparently opted out to study a merger with SP instead. EL's interest in joining CR was also a factor. That being said, ATSF commissioned a study that said a 6 year rehabilitiation of EL's physical plant could have transformed the Friendly Service Route into a RR capable of generating $28 million per year in profits. Furthermore, ATSF was definitely ahead of the curve (pun!) in predicting EL's wide clearances and lack of congestion would make its ROW an asset for the burgeoning intermodal traffic.

It's a pity the already crippled EL was doomed by Agnes in '72. The money that would have modernized the yard at Marion (and make EL profitable) was instead used to patch the mainline back together. I figure EL would've had a hard time anyway but a modernized plant would've made it more attractive to ATSF and possibly even given N&W the impetus to ditch the LV connection in favor of a full merger with Dereco.

Sadly, bad luck, failed negotiations and former PC officials made sure EL would be torn apart and relegated to backwater status.

[LCJ]

...former PC officials made sure EL would be torn apart and relegated to backwater status.

With due respect, Matt, (really not wanting to set off a firestorm here) this is not factual. I read it instead as an emotional statement. These were ALL business decisions, and not based on some kind of childish vendetta against EL routes. Most of the major decisions were actually made prior to PC managers even being involved in the process.

It wasn't about any prior railroads being kept intact at the expense of others. It was about the long-term success of Conrail, above all.

But then, I believe we've covered most of this weel-beaten ground in other threads over the years.

[Matt Langworthy]

...former PC officials made sure EL would be torn apart and relegated to backwater status.

With due respect, Matt, (really not wanting to set off a firestorm here) this is not factual.

Let's just say I disagree with your statement vehemently, but I will not derail this thread. I have made my points about this subject in other threads, and will let them stand there.

[henry6]

...former PC officials made sure EL would be torn apart and relegated to backwater status.

With due respect, Matt, (really not wanting to set off a firestorm here) this is not factual. I read it instead as an emotional statement. These were ALL business decisions, and not based on some kind of childish vendetta against EL routes. Most of the major decisions were actually made prior to PC managers even being involved in the process.

It wasn't about any prior railroads being kept intact at the expense of others. It was about the long-term success of Conrail, above all.

But then, I believe we've covered most of this weel-beaten ground in other threads over the years.

THERE ARE A LOT OF PEOPLE who would disagree with you, LCJ. And with facts, not emotions, too. Look at what is left of the EL routes and what is left of the NYC and PRR routes. CR decided on routes they didnt't want and virtually the next day track was ripped out before any authority or shortline or anything, could comment or make an offer. The Lackawanna's New Jersey Cut Off is a prime example of this: decided to abandone, dismantled and sold in a single bound before anyone really understood what had happend. And there are other cases. The EL line cut across country bypassing fouled yards and clogged tracks and was a great high and wide route because of more than adequate clearences. But Penn Central/Conrail management did not want anything outside of their NYC/PRR corridors which would present an opportunity to launch a competitive railroad with a "we don't want it but we don't want anyone else to have it" philosophy that dismantled the integrity of the EL (and LV and L&HR routes). On one hand it is what made CR such a success that is was able to be sold off in a public bidding and later to NS and CSX. On the other hand it decimated a legitimate rail route that would have provided formidable competition while downgrading route cities' and towns' ability to maintain a viable industrial base. Those are facts, not emotion.

[LCJ]

OK, well, I understand that perspective and respect anyone's absolute right to cling to it. I just see it differently, I guess. If the management of Conrail had allowed a competitor to come into their franchise area without doing all they could (within the bounds of ethics and the law) to mitigate the effects on the business, they would have been guilty of neglecting the long-term interests of the business. It's called capitalism for a reason. It involves some hard edged decisions at times.

Within the timeframe in question, it was not in the best interest of Conrail to preserve a route structure that was not adequately supported by revenue. Changes were absolutely necessary, in spite of the desires of some who would see it otherwise. It's really that simple. At least from my point of view.

Remember also that the addition of EL to the mix was a relatively last minute event. The Conrail system was planned out before that came about. Conrail management had the repsonsibility to make that last minute plan work as well as possible, under a threat of liquidation if it all failed.

Please feel free to disagree -- but I won't say any more about the subject.

[henry6]

OK, well, I understand that perspective and respect anyone's absolute right to cling to it. I just see it differently, I guess. If the management of Conrail had allowed a competitor to come into their franchise area without doing all they could (within the bounds of ethics and the law) to mitigate the effects on the business, they would have been guilty of neglecting the long-term interests of the business. It's called capitalism for a reason. It involves some hard edged decisions at times.

Within the timeframe in question, it was not in the best interest of Conrail to preserve a route structure that was not adequately supported by revenue. Changes were absolutely necessary, in spite of the desires of some who would see it otherwise. It's really that simple. At least from my point of view.

Remember also that the addition of EL to the mix was a relatively last minute event. The Conrail system was planned out before that came about. Conrail management had the repsonsibility to make that last minute plan work as well as possible, under a threat of liquidation if it all failed.

Please feel free to disagree -- but I won't say any more about the subject.

You are right. As you said above, and as I have stated many times, CR's management made the right moves to assure the success of the entity known as CR. Thats fact and a successful business operation. But other facts, not emotions as you indicated earlier, about how CR dealt with non PC properties (except RDG/LV H'brg-Allentown-NJ) was detrimental to the well being of the EL route and the communities which it served. It is the how and why of CR's success. No arguements.

[GOLDEN-ARM]

Since LCJ was there, prior to "C" day, and up until the end of it, and was a manager, for the majority of his career, and knowing his penchant for details, I am siding with him. The fact that the EL wasn't included in the ConRail rationalization plans, until the very end, speaks for itself, and the loss of so much EL trackage. It could be said the routes chosen by ConRail, were the result of a heavily "PRR/PC board, and other lines/routes suffered because of that. It could be said the routes abandoned, weren't economically viable, or were redundandt. The end result, the Carrier did what it had to do, using US Government dollars, to resurrect a rail infastructure, that had imploded, and was beyond salvage, as any single "prior-right" operation. Some lost all, all lost some. The "what-if's" will most likely continue, forever.
Mergers are always a tricky thing, and someone always gets the "dirty" end of the stick. There will probably NEVER be a merger, where all involved are happy. There is always a loser. Having been through one, or two, myself, I know the sentiments, of "lost jobs", routes, seniority, or whatever. Feelings and sentiment are always over-ruled, by reason and profit.
Just my .02 cents, on the topic. Your feelings, may vary........

[Zeke]

I worked for the Penn Central 1970-76 and was there on C-day 4-1-76.While we wax eloquently about the what ifs in the comfort of our computer rooms let me relate the true tenor of those times from my perspective. The northeast railroad scene was teetering on total financial collapse, my friends working over in Eport on the CNJ already had a few weeks when there were no paychecks. Some of the guys over on the Lehigh Valley had got together and agreed to work five days but only put in four time cards( yes work one day for no pay ) trying to give the company some financial breathing room every week. The people over in the USRA were feverishly working and hoping to pull C-day off with out a total meltdown and the labor organizations were giving till it hurt attempting to hammer out some agreement that would not result in a massive labor strike on C-day. The Federal government realized way too late the lifeline northeast railroads provided to the economy and financially healthy midwest and western shippers and railroads. It was throw money at it and pray time. The E-L got lost in the titanic forces at play here for better or worse.

[wdburt1]

I too was there at the beginning of Conrail: specifically, a Congressional staffer working for the ranking Republican on the House Transportation and Commerce Subcommittee in 1975, who represented the western Southern Tier of New York.

The notion that EL's demise was just a business decision deserves some critical scrutiny.

As LCJ correctly notes (and I have great respect for his views based on many past postings), the big EL abandonments including the Marion Division were effectively decided by USRA, not Conrail.

He is also correct in saying that EL's late entry into USRA's process made it an afterthought; some would say "a stepchild."

However, the notion that Conrail's managerial decisions were merely capitalism-in-action is a fallacy that would revolt Ayn Rand, F.A. Hayek, or Milton Friedman. No reputable economist confuses the actions of managers protecting a governmentally imposed monopoly with actions of managers promoting a truly private sector business. To say that the two are the same is to assert that it does not matter that Conrail's monopoly was imposed, by force, upon the economy of the Northeast. It does matter.

Year ago, Larry DeYoung described the Conrail position with regard to the monopoly as "we stole it fair and square, and we're keeping it." Just so. The question remains whether the rest of us should agree that this was right, or necessary.

WDB

[LCJ]

...Larry DeYoung described the Conrail position with regard to the monopoly as "we stole it fair and square, and we're keeping it." Just so. The question remains whether the rest of us should agree that this was right, or necessary.

I'm experiencing deja vu, here. I know (without searching the database) that we've been through all of this before.

I don't claim to have omniscience here in this matter. I certainly wasn't privy to all that went on in the period in question. And I certainly respect Mr. Burt's perspective on the issue. I just disagree, I guess (no kidding!).

I guess my response would be to ask -- how should CR's managers have acted differently in order to have pleased those who now pine for a viable, intact Erie Lackawanna system? Would it have made economic sense to pour hard-earned capital into maintaining a system structure larger than necessary for the same ongoing revenue base? How would a management team justify that? Should they have allowed someone to take away revenue or drive prices down without resistance? As a public service, perhaps? To paraphrase a certain former Secretary of Defense, "You go into business with the market conditions you have, not the market conditions you wish you had." I don't know -- maybe that doesn't fit this situation, though.

In deference to Mr. DeYoung, I'm not sure how he sees CR managers as having "stolen" the so-called monopoly. Protected it, perhaps. Guarded the franchise, yes, as in a responsibility to the owners of the enterprise. How exactly did they manage to "steal" it?

Should USRA have set things up differently to allow for more direct competition? I guess one could argue that. Once the game was set in motion, though, it did not behoove Conrail (as I see it anyway) to voluntarily diminish its own franchise without adequate compensation.

[wdburt1]

For the most part, Conrail's managers executed their mission very well, sometimes brilliantly.

That does not mean that their decisions were those of a private sector business. At the top levels, especially, they acted not as faceless technocrats, but instead as advocates for various public policy actions affecting Conrail. Their advocacy and related actions often deliberately downplayed and obscured some public policy objectives of the statute that created (and, for awhile, still governed) Conrail, particularly the objective of retaining and promoting rail competition in the region. Instead, they relentlessly promoted the view that Conrail's principal responsibility to the public was to become profitable, which equated to saying that what's good for Conrail was good for the public.

For example, they did not merely say that they could couldn't justify putting capital into the Southern Tier Line or retaining the River Line; they actively fought P&LE's efforts to persuade the federal government to sell it these assets.

Did they gracefully accept the D&H trackage rights that came with the property in 1976? Hardly.

Then there is David LeVan, fending off the determined efforts of a regional planning board to save the former EL west of Hornell, telling Congressman Amo Houghton in 1995 that Conrail needed to abandon thirty to forty miles of the former EL somewhere between Hornell and Meadville to ensure that CSX wouldn't be able to establish a connection with CP.

Yes, of course, we have been over this before. As a study in the troubled area where public policy and business intersect, it continues to hold interest.

WDB

[henry6]

"...how should CR's managers have acted differently in order to have pleased those who now pine for a viable, intact Erie Lackawanna system?"

Who said they should have? What CR management did was creat a viable railroad from what they were given at the inception, one that was saleable to the public (stock market), and thence to NS and CSX. Yes, they did do in the EL system, and we can pine about it all we want. I, for one, feel that the dismantling of the EL did a disservice to the route line cities and their economies. However, I also see how wise the move by CR's management was for CR. However, Mr. Burt and his orginization--as well as a few others in the midwest-- are doing a good job in recapturing some of the lost traffic by offering a clear track for "detouring" around bottlenecks and rebuilding local economies. Maybe one of the blessings of the CR moves, the NS and CSX purchase, and these times, is that such "new" railroads can be created and economies reborn.

[LCJ]

Did they gracefully accept the D&H trackage rights that came with the property in 1976? Hardly.

I have to concur. I saw firsthand the effects of this. D&H trains were often afforded the kind of active neglect that we (Conrail) sometimes experienced on the NEC. The tenant often gets short shrift, for sure. I recall a D&H manager saying to me once, "Now you know how we feel."

If the data were available, I'm sure they would reflect that D&H trains stood on sidings on the Port Road far more hours than any CR trains. One such siding was actually nicknamed "D&H siding."

I'm not sure, though, that this is an indication of overall Conrail policy. I think it's more likely that it was just the priorities of daily operation, wherein local managers were held accountable for Conrail on-time performance, and not D&H operation. I realize, though, that this could have been the reflection of an unstated official policy of active neglect...

That I ever heard, anyway, it was never, "Make sure you screw the D&H." Rather, it was, "Why is the ENES not getting those cars to the complaining customer in Delaware on time?" -- just as Amtrak was concerned mostly with keeping their schedules, and didn't give a hoot about ours.

Again, I would say that the whole D&H-as-sole-competitor concept was not well thought out -- as a key part of the last-ditch inclusion of EL properties into the final plan.

I can't comment on anything Dave LaVan might have said. One thing I will say is that those were somewhat desperate times, even though it may not have appeared so on the surface. Conrail was seriously concerned about takeover threats, and could not afford to allow another strong party to break into the market at that time, in that way. It was a desperate "grow the franchise dramatically or be consumed" state of affairs. When that failed (due to some key miscalculations on the part of CR management) it turned into the cut-back-to-big-X strategy that never really got off the ground in time to stave off the wolves in Norfolk and Richmond.

Let it be known that I'll never blindly defend every decision made in Philadelphia during those times as being the right things to do. There were many other avenues of action that, in my opinion at least, would have better served everyone involved. Such is the life of a (lower) middle manager.

As with many such situations, far more attention was given to satisfying the desires of Wall St. than those of many of the other stakeholders.