What Would Have Happened if NYC Had Stayed out of PC

There is a ongoing thread on the EL forum about if they stayed out of CR, like the B&M did. There is another one here about if NYC had been able to get out of the merger, or unmerge (if that is a real word). I want to toss out some thoughts on this.

The Central was pretty well run. I think that we all agree that Al Pearlman ran a tight ship. It is pretty obvious that the massive passenger losses were sinking the ship. Do you guys think that they could have held on for 3 more years until Amtrak came? How about the possibility of the MTA taking over the suburban services? By the time of the merger, N. Y. S. had already relieved the PRR of the Long Island. Maybe the Central could have gotten a perpetual right to still serve the freight customers, just like the B&M dis by selling the suburban lines to MBTA.

The unmerger thread talked about the Central being rejected by Chessie, as far as merging. PRR still had the N&W and its cash cow, coal. Where would this have left the Central? Could it have made it on the pig traffic, which now dominates its lines? If PRR still had N&W, which by then included the Wabash and Nickel Plate, and its own lines in IN and OH, would that have over saturated the market in those areas? Could Cenral's efficiency have trumped these adversities?

I have wondered if Family line would have been receptive to merger. They would connect in IN, or IL via the L&N (Monon or C&EI). Maybe Reading could have been the middleman, along with haulage rights on B&O between Philly and Washington, and the RF&P. Is this viable?

Would Chessie have changed it mind if Central had waited, and then gotten rid of its passenger obligations? I believe that it would have been much more profitable by then.

The Central would have continued to have passenger problems untl the State of New York faced up to its responsibility to do its part to keep essential commuter services operating. After that happened the rest of the railroad would most likely been able to survive without going totally broke and in the long run with Perlman running the show it would have been able to haul in al reasonable profit. The commuter operation remaining in 1967 was still a big drain and most of it was in New York State so it needed to be faced up to by the state. Between Albany and New York Perlman might have been able to innovate enough to cut the loss to a reasonable level that the railroad could have lived with. West of Albany the passeger operations would have needed big mail contracts or outside help to survive. If neither materalized most likely one train would have remained between New York and Chicago much like you have at present with the Lake Shore. The unwillingness of Saunders and his PRR people to put money into the railroad helped to aggravate the passenger problems with a resulting high cost of moving freight mostly due to the poor condition of the railroad property and facilities. Amtrak would probably still have had to come in to the picture to rescue the railroad from the passenger train losses. Who knows what the end result would have been for the New York Central? Today it is really too late to go back and try to figure this out.
Noel Weaver

In addition to things Noel mentioned, I think also if deregulation had come sooner, it would have certainly aided the NYC by being able to dump the unprofitable trackage that was strapping them. The Central was gone by the time I was born ('71), but it sure sounds like the NYC infrastructure was in better shape than PRR's. Having said that, if NYC was still in business by May 1971, I would think it would still take a lot of capital to bring trackage "up to snuff" with monies saved by losing the passenger business.

My .02 cents,

Charlie

I think the Central would have survived the early 70’s and eventually become part of CSX like what we have today, as the Central was still making a profit in 1967, although it was less than 8 million a year at this point. Perlman tried hard to end passenger service, so the only passenger service the Central would likely have had by 1970 was NY-Albany-(maybe Buffalo) and NY and Boston (maybe Chicago) commuter service. If deregulation happened by 1980 and Amtrak in the early 1970’s, I think the Central would have survived to the late 80’s early 90’s and merge with CSX. If either of the above didn’t happen, then the Central probably would have gone bankrupt during the 70’s or early 80’s, and been taken over by CSX in bankruptcy. CSX was the Central’s natural merger partner as they connected in many Midwestern cities as well as Rochester, and had few parallel lines. By this time N&W had taken over the Wabash and Nickel Plate and would not have needed the Central between Buffalo and Cleveland as well as Cleveland to St. Louis. The PRR would probably merge with the N&W if PC didn’t pan out because of the PRR’s majority holding in N&W as well as the need for a revenue source and to abandon redundant lines, the PRR hadn’t made a profit since 1949 and was living off the N&W stock dividends. The Central was decades ahead of the PRR in terms of modernization and efficiency.
C.J.V.

The comment was made above that if deregulation had happened in 1980 the NYC could have survived for another decade or so. But if it had not been for Penn Central and its subsequent bankruptcy, would deregulation have happened in 1980? I don't see how the Staggers Act could have been possible without the cataclysmic collapse (and I don't think that's an exaggeration) of the eastern railroad network to impress upon Congress that something had to replace the 19th-century regulatory structure that existed at the time.

By 1970, the New Haven and CNJ were bankrupt, the LV, Reading, B&M, and Erie Lackawanna were near bankruptcy, and the writing was on the wall for the Rock Island (and with rail traffic in the Northeast dropping 7+ percent in the early 1970's, there's little chance they could've survived) . Air and Highway deregulation were being considered too. Without Penn Central, the New Haven’s plan B was liquidation, and the CNJ, Reading, LV, B&M and Erie Lackawanna might have also considered liquidation with their respective bankruptcies (In reality, the B&M’s creditors did consider liquidation as the #1 choice for awhile). With the prospect of the majority of rail service lost in New England, Northern New Jersey, and Eastern Pennsylvania, the government would have probably done something along the lines of a mini-Conrail, which could lead to deregulation, or to deregulation itself.
Like Noel said, there really is no way to tell what would’ve happened with 43 years between now and the last day of the Central’s corporate existence.
C.J.V.

FWIW, what would've happened to NYC if they had stayed out of PC?

They would've probably been encircled by other merging roads, cut off from much traffic and, eventually, driven into bankruptcy.

At least that's what Alfred Perlman told a stockholder at an New York Central annual meeting Q&A session (as reported by The Wall Street Journal).

The stockholder's 'question' was, he'd owned Central stock for many years and he "didn't like" the idea of the Penn Central merger.

Perlman, who had a reputation for refusing to sugar coat anything, responded, "None of us like the merger." He went onto explain that all the other eastern roads were finding merger partners and unless Central did too, they risked being encircled, cut off and driven into bankruptcy.

You have probably all seen this, but in case some haven't..this guys modeling is brilliant:

http://modelrailroading.wordpress.com/2 ... miniature/

http://www.youtube.com/watch?v=lYR-cYhp ... re=related

http://www.youtube.com/user/NYCSystem

Scot

If you think about it, the flip side of this is...

If New York Central had stayed out of Penn Central there wouldn't have been any Penn Central.

The Feb. 1, 1968 merger that created Penn Central only included the Pennsylvania Railroad and the New York Central. The New Haven wasn't taken in until eleven months later on Jan. 1, 1969.

On another note, if the NYC opted out of the merger in say 65, Pennsy would have definitely courted other partners... Who would they go with? a western carrier looking to expand east? A southern carrier wanting access to the north? Would the NYC have survived as an independent carrier until the 80's and deregulation? Could the Central keep afloat and keep passenger operations (Like the Southern, but only running 1 passenger train a day)? Who knows. I will say this, the PC merger was a short sighted solution to a long term problem then and now in the US as far as railroads are concerned.

For people like me who were around back then and followed the industry news, I will tell you quite frankly I don't remember any other railroad being interested in the Pennsylvania Railroad. Back then Trains' editor David P. Morgan called Pennsy and NYC the "two wallflowers at the merger dance."

It wasn't so much the passenger losses I don't think (by 1965 Central had theirs pretty much under control), as what was happening in the territory the two roads served. They both served large areas that industry was moving away from. If you chart their traffic on a graph it was all pretty much down hill after the 1920s with the exception of the WWII years.

As two of the earliest trunk lines, they both had huge physical plants and a enormous amount of debt.

The things they needed to do to save themselves -- taylor rates to available traffic, shuck branch lines and secondary routes that were no longer viable -- were not possible given the control regulators had over these roads.

That's what was really frustrating, the more you learned the more you realized the bind PRR and NYC were in.

IMHO, there were no simple solutions to what was a very complex problem with roots reaching back into the 19th century. If there had been a simple solution their managements would've found it. And lets not kid ourselves, the Perlman team at Central was first-rate but the Pennsylvania had some pretty sharp managers too.

IF the two railroads (Pennsylvania and New York Central) had not merged the New York Central had a better chance of making it on its own and it had a better chance of finding another railroad or group of railroads that would have been willing to merge with it. Why do I say this? The New York Central had a much more modern physical plant that had received better maintenance over a period of years. They also had less overall passenger train mileage, commuter operation was practically all in New York State and I think New York State would have recognize that commuter trains were their responsibility if they wanted the service to continue they were going to have to provide support. Finally the New York Central had management that was in the railroad business first and they were willing to put up when it would benefit them such as modern yards, double track CTC and reducing facilities where they did not need them thus reducing their maintenance expenses and taxes. The Pennsylvania was a more expensive railroad to operate with its multiple track main lines, lots of labor intensive obselete yards, signal towers all over the place and no real plans to modernize its signal system and their policty of reduced maintenance especially in yards where many tracks were absolutely decrepit. The Central had a few places where tracks were decrepit as well but they were places where the Central was cutting back or getting out entirely. The Central would have been a much more attractive merger partner for another railroad than the Pennsylvania would have been for the reasons that I have outlined here.
As I said once before, it has been a long time since this unfortunate merger took place and who knows today what would have been the situation had it not taken place.
Noel Weaver

Bottom line is the NYC would have merged with someone, eventually; they were looking for a dance partner as early as the late '50s, it's mentioned in a 1958 issue of Trains Magazine they were looking at C&O. Today's map would most likely have all the same players, they'd just be using slightly different lines depending on who combined with who and what line duplication they would be able to resolve. I think you'd even still have a Conrail, just it too may not have had all the same roads making it up.

Exactly.......the NYC's Robert Young and PRR's James Symes were working toward a deal in the late
1950's toward merger until Young passed away in early 1958. Perlman took over and the big damper
was placed on that. The C&O was attractive with their coal, just as N&W was attractive to PRR for the
very same reason.

Of course, Penn Central "happened", and just maybe if things didn't happen in the magnatude that they
did, the necessary things that did occur in the following 10 years (ie, Conrail, Staggers) may not have been
deemed necessary to fix the railroads the way they are today......who knows?

Charlie

The Central's merger scenario went like this, I do believe.

In 1958 Young suggested to Pennsy's James Symes that a merger between the two companies could save one another lot of money. Symes said at first he was astounded by the idea but the more he thought about it the more interested he became.

Young then committed suicide in early 1959. Alfred Perlman (who had been named NYC president by Young in 1954) decided to opt out of PC -- the PRR execs were angry he gave them very little advance notice-- because, Perlman said publicly, there might be a better deal out there.

Perlman decided on an NYC+B&O merger. Perlman felt there were opportunities there for a lot of savings and B&O would get him places (Philadelphia, Baltimore, Potomac Yard, coal country) that he wanted to go.

Then C&O stepped in with a counter offer for B&O. Perlman offered to make it a three-way merger, NYC+C&O+B&O. But Chessie, because of Central's big mortgage debt, passenger burden and shrinking traffic base, wanted no part of NYC. Although B&O management favored NYC there was a proxy fight and B&O shareholders overwhelmingly chose C&O and C&O alone.

Meanwhile, N&W was looking at expanding out of the Pocahontas Region, to diversify its traffic base. The railroad had been controlled by PRR since the 1920s. Some years N&W dividends made the difference between Pennsy being in the red or the black.

By 1962, after being rebuffed by C&O-B&O, Perlman turned once again to the Pennsylvania. PRR was still eager for the merger and soon PC was back on.

As a condition of their own merger with NYC (and to facilitate N&W+NKP+Wabash) Pennsy agreed to first trustee and later sell its large N&W stock holdings.

By then it was 1965 and N&W had its merger and PC was nearing ICC approval.

If anyone is really interested in this, there have been many books written by and about this era. Don't take my word for it.

There's very little that hasn't been thoroughly researched and written about extensively.