Milwaukee Road and Northern Pacific Questions

Back in the mid to late 1800's, the Milwaukee Road was building its extensive network of rail lines in the Upper Midwest. Sometime around 1890, MILW decided to build a line to the Puget Sound. In 1983, the Northern Pacific declared bankruptcy during the Panic of 1893. Was there any effort on the part of Milwaukee management to purchase the NP during its bankruptcy in 1893 verses building its own line and keeping NP out of the sphere of influence of Hill and Morgan? Could an outright NP purchase have have been a better investment over the expense of building the Pacific extension? The NP-MILW combined system could have complemented one another and ultimately competed aggressively against the GN-CB&Q combined system in the Chicago to Seattle corridor.

From poking around Wikipedia, it looks like the CM&StP had some Standard Oil and other New York ties on its Board of Directors, but was locally controlled until the Panic of 1893. (See http://www.psmre.org/hist-milw.htm for a bit more on this.) According to http://en.wikipedia.org/wiki/Northern_Pacific_Railway, Henry Villard and Brayton Ives (former head of the New York Stock Exchange) fought for control of the NP through 1896, along with three separate bankruptcy courts. In 1896, James Hill purchased his first interest in the Northern Pacific, and in the same year, J.P. Morgan was called in to right the financial ship. Eventually, they created Northern Securities to jointly hold the GN, NP and CB&Q.

So, the Milwaukee had three years in which it could have possibly purchased the Northern Pacific without major interference by Morgan. Major backing could conceivably have been obtained from CM&StP director and Standard Oil oligarch John Rockefeller, as well as several other major shareholders. However, none of the major Milwaukee Road shareholders had apparent ties to Villard, Ives or Morgan (until later), and it might have been difficult to break into any of those cliques. More importantly, the post-Panic Northern Pacific was a legal and financial minefield - three bankruptcy courts claimed jurisdiction over the reorganization process. It's very possible that even if the CM&StP had considered a bid, they might have decided against it due to the potential pitfalls, or the courts might have blocked such a transaction.

Having said that, the Milwaukee was still intensely profitable in the 1890s. Compared to the eventual $257 million (from Wikipedia) it cost to build the Puget Sound Extension, or even the $45 million original quote in 1901, the full Northern Pacific might have been a relative bargain with its land-grant lands, mineral and timber rights, and burgeoning population en route. I have no idea how a purchase could have been effected, with the stock tied up in bankruptcy court, but if J.P. Morgan found a way, John Rockefeller and company probably could have done the same. There wasn't really any parallel track structure yet, as the Milwaukee wouldn't really start building west of the Missouri until the 1900s, and the eventual cutoffs from St. Paul to Terry, St. Regis to Spokane, and Lind to Ellensburg would have had the backing of a much larger railroad without direct competition. The Milwaukee would have had to do some house-cleaning, as the Wikipedia article claims a fair amount of mismanagement within the NP hierarchy, but even that might have been easier than working from the ground up.

Very interesting what-if, CPF363. Hopefully I provided a bit more information for you to mull.


EDIT: If you're interested in another what-if situation, consider if the C&NW had put together an effective bid for the Northern Pacific. The Chicago and North Western doesn't appear to have had as powerful an investor base as the Milwaukee - at least, I can't tell much about their investor structure aside from what the C&NW Historical Society says - but they had rail connections in many of the same places and a strong corporate earnings sheet.

This is a very interesting question, one that I've never pondered until now.

I suspect that mtuandrew is on the right track about that bankruptcy being a major turnoff. That kind of thing can be a major headache for another company to inherit. It seems to me that when one looks through railroad history in the US, there's railroads everywhere that went through bankruptcy and emerged later still independent, unsought by other railroads.

The idea of MILW purchasing the NP must have been something their board of directors might have possibly considered, but couldn't considering the issues related to NP's bankruptcy. Wonder if there is any documentation as such? It would have been interesting to see where the railroad might be today. Would MILW have electrified the west end? Who would control the SP&S, NP-MILW or GN? If C&NW merged with NP, would MILW moved to build the Pacific Extension?

CPF363 wrote:The idea of MILW purchasing the NP must have been something their board of directors might have possibly considered, but couldn't considering the issues related to NP's bankruptcy. Wonder if there is any documentation as such? It would have been interesting to see where the railroad might be today. Would MILW have electrified the west end? Who would control the SP&S, NP-MILW or GN? If C&NW merged with NP, would MILW moved to build the Pacific Extension?

I suspect that the MILW wouldn't have been as able to wrest control of the OR&N from the Union Pacific. Also, I doubt it could have afforded to build the SP&S and entirely free itself of needing the OR&N. The MILW-NP would either be stuck with the OR&N, with its Union Pacific ties, or would be stuck going in halfsies with the Great Northern's SP&S plans and accepting that company's influence.

I'd guess that if the MILW and NP merged, the UP would have eventually gotten the entire system. The C&NW would probably have had to find its own Pacific route, finish its access to Denver, or merge with a Gulf or Eastern road to stay out of Hill hands.

Keep in mind that the Panic of 1893 created a deep depression, some would say worse than the "Great Depression" of the 1930's. I'm sure most railroads were happy just to be able to keep their heads above water and not be one of the many roads to declare bankruptcy, and may not have been anxious to take on a large burden like the NP (even though in the long run the investment might have been well worth it.)

...plus, remember bankruptcy is a tool corporations use to reorganize and stave off creditors. It doesn't mean the company is ceasing operations or abandoning facilities. Many railroads have gone through bankruptcy, some several times, and some were in bankruptcy for many years...still operating trains per usual.

During the Burlington Northern merger proceedings, did Ben Heineman look to get some concessions for the C&NW and if so what did they consist of? Heineman, who put much energy into his proxy war for control of the Rock Island in the late 1960s, seems to not have any disagreements with the whole creation of Burlington Northern but was very concerned with the possibility of UP controlling Rock Island. Wouldn't BN have had a significant impact on the C&NW? What freight did the C&NW have on their line between Chicago and the Twin Cities in the 1960s and did any of that interchange with either the GN or the NP at the time of the merger? Could C&NW have argued for the NP to Seattle and possibly the C&S between Denver and Laural, MT to connect with the Cowboy Line in Orin, WY in exchange for their support of the Burlington Northern merger in 1970?

C&NW could argue anything they wanted, but the BN merger wouldn't have happened if BN had to give up the NP (or a big chunk of it). If C&NW wanted the NP line, I'd assume they would have tried to get it when BN spun it off to Montana Rail Link.

C&NW and NP/GN did interchange in the Twin Cities, but I would assume mostly it would be freight going to CNW online shippers. Freight going to Chicago would have gone on the Burlington most likely.

Besides, C&NW had its hands full in the 1970s with trying to purchase/be purchased by the CMSP, blocking the UP-RI merger, foisting the Employee Ownership program on its workforce, digesting and dismembering the M&StL, CGW, and their own branchline network, and negotiating with BN to get in on the Powder River project. They might have benefitted from a line to the PNW, but not if it would have cost them much of their UP interchange.