Why did the PC merger fail?

If any of you ever get the chance to, read the book titled "No Way To Run A Railroad". I forget who it's by, but it is a very interesting insight into the Penn Central. One of the things I found interesting was that Stuart Saunders tried to bully the accounting department into doing the same things that Arthur Andersen would do. Penn Central could have been Enron-like too!

I've noticed that some of the blame seems to be placed at the feet of the New Haven, because of its inclusion into the mix. Truth betold, I think the whole thing was just too damned big and unwieldy, and would have collapsed under its own weight anyway. It has been written elsewhere how th PC management deliberately shot itself in the foot by deliberately sabotaging the New Haven link to the L& HR, not to mention that unfortunate hotbox fire that took out the Poughkeepsie Bridge (<cough, cough...torch job....cough, cough...arson...cough, cough >). After all, that was the shorter route to New England, but apprently there was no profit in maintaining it. There has also been made mention the the Penn Central Co. was too busy diversifiying into other areas, and not enough effort making the railroad work. It does seem very Enron-esque, and reminds one of the old saw about history repeating itself.

It's true that no one stood to gain from it going down. But, the Wall Street Journal had a piece a couple of days after the bankruptcy declaration about the scene at the court house. Normally, a bankruptcy is a somber occassion. Not at this event. It noted how about a hundred lawyers were standing around outside talking about this bringing them all about $100 million in fees over the next few years. A later count by the mid-70s had that figure being low.

I really think that the bridge fire was a way to kill EL competition. Notice how Dereco roads EL and D&H formed a new bridge route to New England via the B&M.
P&W bought the line to Gardner so that they would have an alternative to PC. PC was also hostile to P&W for reassuming operation of their line.

I have no doubt that the operation of the NH-Maybrook gateway was not favorable to PC operational planning, such that it was. The often repeated story that the bridge was torched has little foundation in fact. My guess is that the cost-cutting of the Claypool (PC VP-OPs) era (eliminating bridge fire watchers the day before the fire) ended up with that result without the fire having actually been planned.

Those who want to believe it was arson will always do so, though, no matter what is written here.

All of these. There was also a quarter of an inch difference in the track gauge between the NYC and PRR that prevented locomotive efficiencies between the two properties.

At the end, however, there were several bond rollover financial movements that never got to the corporate treasury. These were old NYC and PRR bonds that had come to maturity and were paid off with reissues. However, the reissues never got to the corporate treasury. It involved many millions. This all happened in the two to three weeks leading up to the actual bankruptcy filing.

The New York Times traced the money to banks in Europe, Luxumbourg in particular (which was a secret bank haven in those years). William Saunders and a couple of his cronies just happened to have been traced to these same banking cities. This put a lot of obvious suspicion into the overall proceedings.

Enron existed even then.

There were a lot of animosities between the former managements. The NYC had a great crowd of market researchers, costing analysts, and other things that did great links with customers. The PRR had the former "go out and sell, give away ball game tickets, buy lunch, give away golf clubs at Christmas, and overall just push sales onto shipper traffic managers. It was the difference between a "forward thinking today" and a blustering old boy network. Two different cultures within the same corporate shell. They hated each other.

Luckily, in the CR years it was the higher level cost-based, service minded thinking that prevailed in marketing.

Why was the NH force into the NYC/PRR merger? I read Wreck of the Penn Central a few years ago, and if the explination was in there, I don't remember it.

Elwood

The New Haven was beyond life support at this point in time. Its last great cash positive event was sale of land to the State of Connecticut for the building of the turnpike.

It was in severe negative cash flow for many years. But, the political pressure to keep the commuter traffic going was great upon congressmen, senators, regulators, and more in Washington. So, PC was told that a major condition of merger approval was to take on this sick puppy. It aggravated the problems that the PC would have starting on day 1.

Ok my turn to beat a dead horse.
1. If Staggers had been instituted in lets say 1960 I think you would still see branch lines(profitable ones anyway,yes some did make money)and no real mergers of side by side railroads.Why would I want the NYC if I were PRR or vice versa?Give me a western connection or a southern connection that pans out!.How about PRR with GN?NYC withUP?makes a hell of a lot more sense. I have never figured out why those mergers semed to make sense.But anyhow you would have seen the late 80's to early 90's rail boom then maybe.
2.Enron of its day?Lets go back further to the robber barron period of railroading.Nuff said there.
3.It didnt help no one could work with each other and maybe we will never know the true reasons.Ask a PRR man whos fault it is its NYC ask a NYC its PRR ask a NH its the governments.Its just a sad deal all around but here is the best question saved for last.How has the BN merger done so well in the same time as the PC failure?BN got bigger and then the solution to PC, Conrail, gets cut up again.

route_rock wrote:How has the BN merger done so well in the same time as the PC failure?BN got bigger and then the solution to PC, Conrail, gets cut up again.

The original component lines that went into BN were already under the control of the same company (a big happy family of railroad companies) for quite a while before the actual merger of operations into a single corporate entity. As I've offerred here before, if PRR and NYC had done this, they would have had more time to make things work better before throwing the whole mess together operationally as they did -- before having systems set up to work as a unit as did BN.

As for the growth by addition of SLSF and ATSF, well, they just did things right, it seems. Different times, different economic climate, different people orchestrating the structure -- with opportunity to learn from the mistakes of PC.

I've been told that some western roads have used PC as a case study of "what not to do" in their management training programs. PRR management practices, too, especially as it applies to how to treat people.

PC was merger by default. No one else was interested in either as a merger partner at that time, so they were left with each other, pretty much.

Penn Central changed its name to American Premier Underwriters in the late 90's and is vary heavey in the Realestate world.

Greed within the PC management and Management not doing their job as far as maintennace of equiptment and track.

gawlikfj wrote:Greed within the PC management and Management not doing their job as far as maintennace of equiptment and track.

OK! It really was a bit more complex than that, but I'm willing to let it go.

LCJ wrote:it was. The often repeated story that the bridge was torched has little foundation in fact. My guess is that the cost-cutting of the Claypool (PC VP-OPs) era (eliminating bridge fire watchers the day before the fire) ended up with that result without the fire having actually been planned.

Those who want to believe it was arson will always do so, though, no matter what is written here.

I'd never heard about the removal of the fire-watchers.... and quite frankly that timing reeks more than a little..... Here's another piece of info that I remember reading, and I make no claims as to its veracity, as to exactly where the fire broke out on the bridge, i.e., in a section where the bridges sprinkler system was known NOT to be working.
Its entirely possible that it WAS an accident, plain and simple. But , under the circumstances, to have people being skeptical of the "official"story is not to be unexpected.