Will CN ever merge with NS?

Tadman wrote:Wow, who gets to lead that one? Rose or Harrison? Talk about two of the most valuable men in the industry, and one's going to need to step aside...

Gene... you gonna let this one go?

Let's go back 40 years in history.

The New York Central and the Pennsylvania merged to form a nightmare called Penn Central. The short of it, the New York Central people were tossed into the back seat and one of the few railroad Presidents at that time who could turn a profit, Perlman, was forced out! At that time, the PRR was operating in the red and the Central was in the black, not by much but they made a profit. So, why then did the guys losing money get the keys to the castle? Good question. Could it happen again in any other merger? OF COURSE!

Perlman went on to turning around D&RGW from two streaks of rust into a money maker. Has anyone learned anything from it? NAAAWWWW!

Unfortunately, the best person for the job doesn't seem to be a factor in consideration, it would seem.

D/

A minor correction. Perlman went to Western Pacific after leaving PC.

Merci!

Regarding a US transcon, Conrail and ATSF talked about merging, albeit very briefly, in the 1990s.

UP senior execs clearly state that THEY will not be the first to head in that direction -- but if their hand is forced by another certain western road, they will of course follow suit. Uncle Pete has more to lose from going together with either one of the eastern franchises, since they would tend to lose interchange business from the other line. Once one of them is absorbed by that OTHER road (you know, the Big Nothing Sorry Franchise), it's no longer an issue.

That fly-in-the-ointment KCS is also a player in this game, don't forget. How will Haverty and Co. fit into the mix?

Dieter wrote:Let's go back 40 years in history.

The New York Central and the Pennsylvania merged to form a nightmare called Penn Central. The short of it, the New York Central people were tossed into the back seat and one of the few railroad Presidents at that time who could turn a profit, Perlman, was forced out! At that time, the PRR was operating in the red and the Central was in the black, not by much but they made a profit. So, why then did the guys losing money get the keys to the castle? Good question. Could it happen again in any other merger? OF COURSE!

Perlman went on to turning around D&RGW from two streaks of rust into a money maker. Has anyone learned anything from it? NAAAWWWW!

Unfortunately, the best person for the job doesn't seem to be a factor in consideration, it would seem.

D/

Mr. Dieter,
As a former "red man," I would love to dispute your claim that the NYC was more financially secure than the PRR. Problem is, due to ignorance, I can't. I hired-on with the PRR in 1966, a tad bit past 18. My primary concerns in life at that time was the draft, and the number of available damsels at my favorite watering-hole. Knowledgeable individuals from the railroad industry seem to verify your post.
Damn, I loved that Keystone!!

JG - Both roads were in a slow decline. There's a lot more to a financial analysis than just gauging "profit." PRR actually had a long history of paying regular dividends to shareholders -- a fact that helped them to sell the whole idea of a merger with the Central in the first place.

They were both in pretty good shape on the balance sheet (lots of very valuable assets on the books), but the long-term prognosis was dim all around, since revenue was not growing fast enough to keep up with the demand for cash in the short- or long-term. Both were in bad need of the relief that Staggers would eventually bring about.

Both PRR and NYC were slowly selling off assets that weren't sufficiently supported with revenue, just to stay in the game. This pattern continued on through the Conrail period. It was catching up with them by that time, though, with the analysts beginning to doubt long-term independent viability. As you may know, Conrail was actively engaged in selling off large pieces of the franchise at the time they were absorbed by the "southern" parties. Sellus interuptus, so to speak.

You shouldn't be ashamed of the keystone and Tuscan Red. Not as I see it, anyway.

LCJ wrote:JG - Both roads were in a slow decline. There's a lot more to a financial analysis than just gauging "profit." PRR actually had a long history of paying regular dividends to shareholders -- a fact that helped them to sell the whole idea of a merger with the Central in the first place.

They were both in pretty good shape on the balance sheet (lots of very valuable assets on the books), but the long-term prognosis was dim all around, since revenue was not growing fast enough to keep up with the demand for cash in the short- or long-term. Both were in bad need of the relief that Staggers would eventually bring about.

Both PRR and NYC were slowly selling off assets that weren't sufficiently supported with revenue, just to stay in the game. This pattern continued on through the Conrail period. It was catching up with them by that time, though, with the analysts beginning to doubt long-term independent viability. As you may know, Conrail was actively engaged in selling off large pieces of the franchise at the time they were absorbed by the "southern" parties. Sellus interuptus, so to speak.

You shouldn't be ashamed of the keystone and Tuscan Red. Not as I see it, anyway.

No way could I ever be ashamed, LCJ!!!! Thanks.......

JG; You and I should take that great financial debate over to the New York Central forum where I think it might have the same effect as tossing a road flare into a dry cornfield!!

D?

Dieter wrote:JG; You and I should take that great financial debate over to the New York Central forum where I think it might have the same effect as tossing a road flare into a dry cornfield!!

D?

I would love to Mr. D! Problem is, as stated before, I would be speaking from a position of total ignorance!! Not a desirable position for a.....competitive debate.

After reading the Rush Loving book and the Binzen/Daughen book, it seems to me that Perlman (NYC) could turn a profit with a railroad, but still had quite the roadblock to serious profitability in regulation - which existed for 14 years post-1968. His success at WP may be partially attributable to the early-1900's construction of WP and the lack of excessive track and branches present at NYC. That said, he was probably the best shot at keeping PC rail operations on track and at minimal losses. However, Stu Saunders, an attorney that didn't know a train from a wheelbarrow, and Dave Bevan, a psychopath CFO, (both PRR), refused to face the facts and instead covered up the problems and forced Perlman out. PC was still paying dividends when it was making money on paper but physically drained of money in reality.

So conclusions from my oversimplification of the PC debacle?
1. Perlman should not have been forced out but was only able to do so much. Could he have saved PC single-handedly, especially without Conrail's labor concessions and deregulation? That's a tough call.
2. PRR's culture that made them a machine is their downfall - it was a fantastic machine when it worked, but the fact that nobody questioned their superiours led to unchecked aggresion at the top (Bevan) that could not stand.
3. Saunders was likely more of a dunderhead than crook. He was paralyzed by fear of unions and Bevan and his allies (Mr. Mellon of the PC board and the famous bank)

Would a BNSF-CN or BNSF-KCS merger represent the same situation? No. There would be tough consolidation choices, but first both roads are profitable. Second, we have mistakes of PC to learn from, as well as the success of UP-MP-WP, CSX, NS, and BN/BNSF to learn from. In fact, Mr. Watkins at CSX wrote the book on a succesful merger, gently consolidating Seabord and Chessie (although their later affairs under Secretary Snow are another story...) over a five year period rather than crash jamming them together like PC did.

As for the final question, will there be just two titans of the rails in USA and Canada? Maybe for a short while, but I believe there's a optimal Class I Railroad size, and the "two titans" theory is just too big. How can a company with the expenditure needs of the transcon or waterlevel route justify a marginal branch or even secondary mainline suitable for GP40's and moderate traffic? They can't. Should we see the "two titans" emerge, there will be a boatload of new regionals, a reinvention of the WC or 1990's NYSW concept if you will.

Don't forget the strangulation created with the UP/SP merger. That was one that NOBODY saw coming. They got rid of too many people and then didn't have enough to do the work.

Sound familiar?

CN did the same bloody thing!!

D/

Most of the problem with UP's absorption of SP had to do with UP managers generally disregarding the experience and knowledge of SP operations managers. The catastrophic consequences (complete constipation and meltdown of train operations practically systemwide) WERE foreseen by the SP folks and others, but they were arrogantly ignored by, well, Omaha (yes, I know, that's where I am). The main perp, I understand, is now at KCS...

The shortage of crews and locomotives in the face of unprecedented increases in traffic levels, came a few years later.

lock4244 wrote:Yeah, CN bought IC. But I think that CN ended up paying IC to take them over! Chicago, geographically is the logical place for CN to headquartered... it is where east meets west meets south. I'm not saying I like the idea, but is does make sense.

That actually sounds about right. Out of all the rr's owned by CN that operate in or around Chicago (IC, GTW, WC, CCP), the IC gets priority in EVERYTHING!

Chicago, geographically speaking, would be the ideal place for CN to have its headquarters. Homewood would be to small so they'd have to get something probably closer to downtown.

It's doubtful that CN will ever be headquartered anywhere but Montreal. We have this thing in Canada where we pander to Quebec to keep the seperatists at bay through appeasement. Montreal has been hit hard by the idiot seperatists chasing many corporate HQ's away, so it plays pretty well in political circles to interfere with anything they can to keep those jobs there.

Of course, the joke is that CN maintains a PO box and a broom closet in Montreal, fully equipped with a milkcrate chair and a cardboard desk. Everything else is run out of Chicago.