I thought of something that might be interesting...what if the NYC had merged with the P&LE instead? The "Little Giant" was an NYC vassal that could have easily have been merged into the Central. P&LE-NYC was an ideal merger! The two were already integrated (to an extent), and thus the ICC probably would have allowed for the merger to take place (it would be considered "a streamlining of corporate structure"). Of interesting note, in 1967 the 209 mile P&LE a had net income of roughly $10 million dollars, whereas the 9,538 mile Pennsylvania had a net income of only $9 million.
Then there's Amtrak. According to the 1966 annual report (the last before the PC merger), the NYC lost $16 million dollars on passenger service. Amtrak was on the drawing boards at the time (Amtrak was NOT
caused by Penn Central, but rather by pleas from railroads for federal funding of money-losing passenger trains), and once it was formed in 1971, the NYC would have a net income of $33 million
a year. While not astounding,
the Central would have been the strongest of the eastern railroads, and it would have been able to make it to deregulation. Deregulation also was NOT
caused by Penn Central/Conrail, but by the Rock Island's liquidation and fears of nationalization. (I've read numerous articles on why they passed deregulation, and one congressman said something to the effect of "We don't want another Rock Island.")
Now, the Pennsylvania...this might take awhile. The real trouble began with Saunders. First of all, he was elected in an attempt to make peace with Perlman. Howard Butcher III thought that he would get along well with a Al, but there were several problems. Al was an operations man, while Stuart was a finance man. This is never
a good combination. Operations men realize that capital investment is what's needed for healthy returns in the long run, but finance men tend to only think in the short term. Saunders was no exception. Instead of trying to rationalize the Pennsy, he diversified. The reason for this was that the PRR was being forced to divest itself of the 3 million shares of the N&W that they owned because of the Penn Central merger, and the Pennsy would need a new wellspring to replenish itself. Each year, the Pennsy would receive $24 million dollars in dividends from these shares, and it basically served as the lifeline for the company. I will give Saunder's kudos on one
of his investments: Buckeye Pipeline. Buckeye was an excellent
investment. In 1970, it produced roughly $36 million dollars in dividends, all for the Pennsylvania Company/Penn Central. Madison Square Garden and the "Air Rights" deals were also good. If only the same could be said about his other
purchases. Executive Jet, Arvida, Macco, Great Southwest. What do these all have in common? Real-Estate and Transportation require large amounts of capital! If you have two transportation subsidiaries and three real estate subsidiaries, one
of them is going to suffer from malnutrition.
A better choice for the Pennsy would have been the Wabash's Herman H. Pevler. Who was Pevler? Pevler was pretty much the Pennsy's version of Perlman. Described as "a driver who operated with doors open and coats off," citing the "sheer force of his personality" and vigor in his activities, Pevler was a true operations man. While disliked at the N&W, Pevler was quite a good manager. Wisconsin Central's Ed Burkhardt recalls the time that Pevler visited the Wabash's hump yard in Decatur and was told that the yard was perfect. He chuckled and told his traveling associates "Pull the pin. I'm going to stay here for a couple of days to observe this perfect yard." Both Pevler and Perlman were former "gandy dancers," and Pevler even became a division superintendent on the PRR. Certainly, Pevler would have been approved by the mainliners, as he was a "proper" Pennsy-man. But when Pevler got to Philadelphia, he would have immediately re-appraised the PC merger, and would have come to the same conclusion as Perlman: BAD IDEA. Pevler would have still acquired Buckeye for $84 million, but the remaining $116 million that was used for diversification in "our timeline" would have been plowed back into the railroad, upgrading yards and adding CTC. The dividends from the N&W and Buckeye also would have been invested into rehabbing the Pennsy, and Pevler would have done several things that Saunders didn't:
1.The Pennsy received permission numerous times to discontinue passenger trains, but Saunders wouldn't allow it in order to garner political support for the Penn Central merger. Pevler slashed the N&W's passenger service with unrelenting zeal, so I can see that he would have had no problem with doing the same at the Pennsy.
2.The Pennsy also received permission to drop unneeded brakemen. But Saunders decided to keep the men on the payroll and provide any workers that were
laid-off with hefty severance packages. If Pevler had gotten permission to drop the firemen, he would have dropped them immediately.
3. He would have sold the DT&I to the N&W. Why? The DT&I was barely making any money (around $1.8 million a year), and it wasn't paying dividends. The N&W had always
had an odd fixation with its cousin (both were Pennco Properties), and even offered to pay $25 million for it. Had Pevler sold it for that price, but asked that the N&W paid for it in stock, the PRR's dividends from the N&W would have swelled to $28.5 million dollars a year, and its ownership would have increased to 3.3 million shares. The Pennsy would get $2.6 million dollars a year in dividends (from the 260,000 shares of the N&W added because of the DT&I deal) from the sale of a property that had a net income of $2 million dollars in the best
When Amtrak would came around, the Pennsy would have been relieved of its intercity passenger trains, and thanks to the savings (assuming that the Pennsy had been able to cut passenger trains to the same level as the NYC did), the Pennsy's net income would be around $35 million. This, combined with the stream of dividends from Buckeye and the N&W (roughly $64.5 million!) would have allowed for the "Standard Railroad of the World" to stay afloat.
What about the other
railroads that made up Conrail? Here's where it gets interesting.
Without Penn Central, the New Haven would have been a junkie living on state and government subsidies. That is, until Amtrak comes. With renewed zeal, the New Haven trims its branches, rebuilds its equipment and mainlines and makes deals with the MBTA, ala. the Boston & Maine. After emerging from bankruptcy in 1980, Guilford Transportation Industries acquires the New Haven for $23 million. (Hmm...Pan Am GP40-2L's on Hells Gate bridge? Sounds good to me.
The Reading and Jersey Central would have been forced into liquidation. 259-miles of the Reading would have ended up going to the B&O in 1972 (as Conrail wouldn't exist, they would have no other choice). The Jersey Central's routes West of Jersey City would have been abandoned, while the remaining Jersey City-Bridgeton line would be split. South of Winslow Junction, the PRSL would take over, while the Winslow Junction-Jersey City route would be purchased by the State of New Jersey. As a condition of the formation of the Chessie System and also the Reading acquisition, perhaps the NYC would have purchased the B&O's interest in the Monongahela.
The Erie Lackawanna would have still declared bankruptcy, and the Pennsylvania and New York Central would "generously" offer to provide service over the remnants of their fallen competitor. The two railroads would split up the EL at Youngstown, with everything east of there going to the Pennsy, and everything west going to the Central. The Youngstown-Marion line would make an ideal extension for the "big four," while the Southern Tier would have put the Pennsylvania on par with the NYC. Perhaps the Marion-Chicago line would have remained in operation as a sort of "release-valve" for the Water Level route, and also so that the NYC could compete with the Pennsy in the Lima-Huntington/Fort Wayne-Chicago corridor. The NYC would expect some concessions from the Pennsy, namely the sale of the remaining third of the Monongahela that it didn't control. The Lehigh Valley would have been sold to Grand Trunk Corp. in the late '70's, ala. the DT&I. As for the "unsaved" Western Pacific, Western Pacific Industries would have sold the assets of the WP to the Union Pacific in early 1979.
This is what this alternate Northeast would have looked like on the eve of Deregulation:
Chessie System (C&O-B&O-WM-259 Miles of RDG):11,558 Miles
New York Central System (NYC-P&LE-IHB-MGA-536 Miles of EL):10,838 Miles
Pennsylvania Railroad (PRR-1086 Miles of EL):10,624 Miles
Norfolk & Western Railway (N&W-DT&I-IT):8,391 Miles
Pennsylvana-Reading Seashore Lines (Joint PRR/Chessie):357 Miles