The rush to rip up track, and why keep the track they did...

[keeper1616]

I edited the title to better reflect what we are talking about here.

[Matt Langworthy]

Jordan left CR near the end of 1980- I've heard that he wasl also canned because he was too cozy to the outgoing Carter administration. Byt so what really happened, consider this quote posted elsewhere in this forum by wdburt1 (aka William D. Burt):

"Think of it as a pendulum that swung too far each way.

Referring to the Jordan years, a Conrail executive--I believe it was L. Stanley Crane--was once quoted in print as saying (I paraphrase), "We spent a lot of money rebuilding yards and secondary lines that we ended up not needing." USRA reported pretty much the same thing. Certainly, some of this was due to the need to eliminate slow orders and safety issues, and most of the plant had to be operated until it could be rationalized. But both Crane and USRA emphasized that Conrail rebuilt its system for a freight traffic volume that never materialized after the decline of the Rust Belt.

So along comes Crane with his philosophy of resizing the infrastructure to fit the traffic they had, aided by the Northeast Rail Service Act of 1981 which permitted expedited abandonment.

It was only four years later that the stack train boom began.

In the late 1980s, Conrail was still tearing up double track on key intermodal routes.

In any effort as heroic as Conrail's rebuilding of the Northeast railroads, some miscalculation was inevitable. The persistence of such miscalculation, however, testifies to Conrail's insulation from market forces. Competitors learn from each other--they learn what works and what fails. It was the Susquehanna, after all, that taught Conrail that Sea-Land really did need to have its own terminal in order to wring the true potential out of the stack train, that it wouldn't work unless the stack train operator could control the loading and unloading process, which containers got through the gate first, and all the rest. And it was Norfolk Southern, confined to its upper Midwest markets, that taught Conrail how to use RoadRailer profitably in short/medium haul lanes. In both cases, Conrail "adopted" these technologies only after initially giving them grudging cooperation at best, largely because Conrail's first priority was to defend the massive piggyback traffic it handled. The lack of appropriate market incentives caused Conrail to underestimate the potential that is now being realized."

What he's saying is: Conrail was short-sighted. Some of the traffic downturns of the 1970s were caused by inflation and other economic woes that eventually ended. And CR was far too intent on maintaning its monopoly to even sell former EL lines (like the current WNYP route) to interested parties that could have really made use of them. Both Suzie-Q and CP wanted the Southern Tier, and it could have made a big difference not only to the RR industry but also the local economy.

[nessman]

I think you guys are discounting the reasoning behind the formation of Conrail in the first place - to consolidatate the assets of six bankrupt railroads into one profitable entity. This meant a wholesale liquidation of the remaining liabilities - i.e.: abandoning those routes that were the biggest money losers in terms on online traffic, track conditions, overall infrastructure (signalling, bridges, etc...), redundancy to more profitable routes, etc.

The business model of northeast railroads prior to 1976 could no longer sustain itself - it was time to devise a new business strategy which often means making some very difficult decisions to do what's necessary to sustain the business.

The notion that Conrail execs "hated" the E-L is complete hogwash that serves nothing more than an argument point for die-hard foamers. I also believe that the theory that Conrail would abandon lines so they wouldn't become through routes for competing roads is also a load of crap... not once have I seen a shred of credible evidence citing competition as a reason for abandonment.

The reasons behind Conrail's decisions to abandon select routes was purely business. The money losers got axed. It's pointless to keep debating this.

[ANDY117]

Don't forget how they tore up our precious semaphores around here on the tier. Instead of fixing them, they just rip em up and plunk in a SA type, or a G type.

[charlie6017]

While I can sympathize with the loss of the semaphores (I liked them too), it was crazy to keep them. Things break on them, parts may be hard to find, etc. The single-tracking west of Binghamton wiped out quite a few. It made sense to replace them with new, lower-maintainance signals.

[wdburt1]

Nessman writes:

The notion that Conrail execs "hated" the E-L is complete hogwash that serves nothing more than an argument point for die-hard foamers. I also believe that the theory that Conrail would abandon lines so they wouldn't become through routes for competing roads is also a load of crap... not once have I seen a shred of credible evidence citing competition as a reason for abandonment.

The reasons behind Conrail's decisions to abandon select routes was purely business. The money losers got axed. It's pointless to keep debating this.

Response:

I don't have time to fully wade into this debate, but some misconceptions are fairly straightforward to disprove.

1.) It is correct that powerful Conrail executives did not "hate" the EL. In some cases, however, they did bring with them a profound disdain for the EL that they had learned at NYC, where a desire to wipe out the Erie had been part of basic training since the 1860s.

2.) Did Conrail abandon lines to keep them out of the hands of competitors? Absolutely. Examples:

a.) Erie River Line, abandoned 1981 to keep it out of the hands of P&LE, which was then agitating to force sale of the Southern Tier Line so P&LE could use it to move Pennsylvania coal to New York State and New England power plants.

b.) Lackawanna Cutoff, abandoned 1984 after an investor group working with D&H failed to come up with $6.6 million to buy the line. This group got its chance only because a federal judge blocked the abandonment on antitrust grounds. The deal fell apart when NS announced its intent to acquire Conrail in February 1984.

c.) Corry-Meadville, attempted abandonment in 1995. Northwest Pennsylvania Rail Authority acquired the line using a compulsory procedure available under the Interstate Commerce Act, prevailing against Conrail's legal opposition. The Northwest Pennsylvania Rail Authority acquired the line using financing provided in large part by the Delaware Otsego System, which was at that time rather closely working with CSX on intermodal traffic. Many correctly viewed this as a case of CSX protecting the viability of an alternative through route in the event it was confronted again with an NS takeover of Conrail.

These are only the examples in which I have been personally involved in my career. There are others. In all cases they are well known to those executives who were involved as well as many others.

Perhaps the best illustration, which I have previously related, is a 1995 meeting held in the office of Rep. Amo Houghton, attended by Dave LeVan and other Conrail officials, the executive director of the Southern Tier West Regional Planning Board, Rep. Houghton, and me. I was working for as STW''s consultant at that time. We set up the meeting to make a last-ditch effort to persuade LeVan to sell STW the derelict Hornell-Corry line so we could revive it for local service. LeVan replied, heatedly, that his objective was to abandon thirty to forty miles somewhere between Hornell and Meadville so CSX could not fashion a connection with D&H/CP. If he succeeded in abandoning Corry-Meadville, we would be allowed to acquire Hornell-Corry. Otherwise, he would move to abandon Hornell-Olean, and then we could have what remained.

In March 1997, barely two weeks before CSX and NS announced their agreement to split up Conrail, the Asset Management group was still fiercely attempting to win the consent of NYSDOT for a sale of the Hornell-Corry line to Buffalo & Pittsburgh, with the understanding that B&P would abandon it and pay Conrail 75% of the net liquidation value. Even then, the appointed protectors of the Conrail monopoly, like the occupants of Hitler's bunker, remained faithful to the company's objectives. Still advising STW, I played a role in blocking this case of corporate vandalism.

At all times it was possible to rationalize such behavior by pointing to the lack of business on former EL lines--the western outlet having been abandoned, the remaining local customers knowing full well that Conrail wanted them gone too. It took WNYP a good couple of years to overcome the snake-bit feeling that these customers still felt in 2001.

The assumption of normal business practice does not apply in this case.
And no, it's not pointless to debate what we lost, and for what reason.

WDB

[LCJ]

Even then, the appointed protectors of the Conrail monopoly, like the occupants of Hitler's bunker, remained faithful to the company's objectives.

I think this speaks for the quality of CR leadership. The shot about Hitler's bunker is inappropriate -- and a highly inaccurate descriptor, from my perspective.

I don't believe this example rises to the level of unfair business practices. It is, after all, a dog-eat-dog business world. What well-run company these days would not work hard ("faithful to their objectives") to protect their franchise from encroachment by competitors?

No one likes being on the losing end, for sure.

[nessman]

Thanks Bill... well said, I stand corrected. I truly appreciate the insider viewpoint - your words are absolutely credible over the the railfan rumor grapevine.

[wdburt1]

I have often agreed with what LCJ has to say--his posts typically reflect both experience and a high level of rationality--but not this time.

What separates us is not our regard for the quality of Conrail management, but instead how one views the monopoly. I have no issue with a company that defends a dominant position gained through competition in the free market. Conrail, however, got the monopoly through a statutory process that deprived the Northeast of railroad competition. I do not wish to debate here whether that was right or wrong. Suffice it to say that if one views it as wrong, as many do, then management's dedication to an objective that is not and never was in the public interest may be questioned, especially after it was clearly a lost cause.

WDB

[nessman]

I think at the time (early 1970's) a monopoly was a necessary evil in order to save railroading in the northeast. 6 railroads competing against each other in some form or fashion proved to be a business model that could no longer sustain itself. Whether or not the government should have made provisions in the beginning to force the split of Conrail once it became profitable is another debate altogether.

The CSX/NS split of Conrail should have come sooner, but later is better than never. The split made sense and brought some competition back to the northeast.

Of course, what would have happened if Conrail never materialized? Would there be even more lost active rail in the northeast if the 6 RR's went into a survival of the fittest mode? There was a public interest in forming Conrail in that railroad property tax assessments and jobs would be lost if entire RR properties were scrapped altogether.

Obviously this can be debated at great length... and I'm sure it already has.

[LCJ]

It's ironic how, not long after the 1995 meeting described above, LeVan approached Snow at CSX to negotiate a "merger of equals" -- after having been so adamant about preventing CSX's access to the northeast on the line in question.

1995 was a desperate year for the CR crew. I recall times when I was part of a team that went out to locations (such as Clearfield) that were to be sold off to the right buyer -- to try to reassure the employees that we would do the best we could for them. It was not a happy time.

Our company, while appearing to be doing very well, was on the brink of not being able to survive as an independent franchise. The "Big X" plan was at the heart of the proposed stop-gap solution. It, of course as we all now know, was doomed as well.

I guess one's view of the so-called Conrail monopoly (not a true transportation monopoly, after all) varies with one's position during that period. I understand there were many customers (those who were locked into rail service) who didn't care for the power we had over them in this regard.

Ah, but that's all gone now. CSX is now busy running their portion of the property into the ground.

[wdburt1]

When I walked into Congressman Houghton's office the morning of the 1995 meeting with LeVan that I mentioned above, one of our group asked if I had seen that morning's Washington Post. There was a copy in the reception area. In it there was in interview with John Snow in which he said that the breakup of Conrail was "inevitable."

When LeVan arrived, he was agitated. It was clear that he was there only because a congressman had asked him to come in, and he seemed to want to give us all a piece of his mind. His lobbyist, Bill Newman, was red-faced throughout the meeting, a bit rude, and patently anxious to get the boss out of there.

In the course of refusing to sell us the Hornell-Corry line, LeVan turned to Amo Houghton and said, "Don't you understand? John Snow is in this morning's paper threatening to break up my railroad."

I am not sure there was any real logic there in terms of explaining why tearing up forty miles of the Erie would save Conrail's independence. But I always thought that it was an interesting moment.

WDB

[nessman]

It's not uncommon for business execs to be unable to see outside the little bubbles in which they exist.

[LCJ]

In the course of refusing to sell us the Hornell-Corry line, LeVan turned to Amo Houghton and said, "Don't you understand? John Snow is in this morning's paper threatening to break up my railroad."

I understand it was right around this time -- or shortly thereafter -- that the board told LeVan to "find a buyer" -- leading him to knock on CSX's door in Norfolk. I have to wonder how much of a role the Post's prophetic Snow interview had in spurring that action.

Clearly, Hornell-Corry was small potatoes for LeVan, with all he had on his mind at that point -- although the pressure from CSX to gain that access probably did weigh on his eventual decision.

Thanks for that insight. I can picture Bill Newman as you describe his actions that day.

[Matt Langworthy]

Of course, what would have happened if Conrail never materialized?

I don't think that was the point of the this thread. My opinion was that EL should have been kept separate, and that is started the verbal firestorm between myself and Noel. The RR industry in the Northeast absolutely needed gov't intervention. Congress passed the 3R Act in large part because 5 of the 6 RRs that later entered CR petitioned the ICC circa 1973 to suspend or cease service. (Guess which one didn't?) The financial damage to the country would have been worse than the Depression, if those RRs had stopped running.

Thanks for the support, Bill. I felt very much alone in making my arguments until you entered the fray. Unfortunately, my opinions are sometimes belittled because I haven't worked in the transportation industry (yet). Never mind the fact that I read voraciously, owned CR/NS/CSX stock (thereby getting the reports), or have some pretty good knowledge of the area where I grew up.

An eventual CR split might have been unnecessary, if EL's mainline had remained independant. In fact, CR's limits on competition denied D&H/CP the full access to former EL (and LV property) that would have made the operation a successful alternative. Having said that, CR did a good job in resolving the PC mess and their management should be remembered for that.