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The failure of the Eastern Railroads
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HSSRAIL
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The failure of the Eastern Railroads
 
« on: Jan 19th, 2010, 8:48pm »
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There have been numerous posts concerning poor management of the Eastern Railroads overcapacity etc. I would like to hone in and be a lot more specific about the failures.
 
In discussing management I believe that a fundemental review is necessary because while there are no formulas for success in life perhaps there might be some real positive don't do's. If the failings of past managements is not examined todays business leaders risk making their mistakes. The Northeast Railroad Crisis emerged between 1950 and 1970. Most of the top Management of the involved railroads were born between 1900 and say 1920. A couple of questions haunt me.
 
1) what is the timeline between bad decisions and their actual impact? Does a company get in trouble because of decisions made 5 years ago or can decisions made 20, 30 or 40 years previously eventually doom it?
 
2) The Northeast suffered from surplus capacity? This raises the question what is capacity and under what circumstances did it become surplus?
 
Railroad infrastructure breaks into three catagories:
 
Branch Lines built to serve specific industries which could become surplus if those industries fail.
 
Terminal Facilities: This includes hump yards and waterfront trackage.
 
Routes: which encompass mainlines or point to point services between major cities.
 
Any and all of the above could be surplus it becomes interesting to ask the question if the facilities constructed were surplus to begin with at time of construction? In the Northeast the answer to that is going to be in the affirmitive. Also, relevant to the discussion is the distinction between available and adequete. Just because it was convienent to locate railroad terminals that served New York City in Jersey City, NJ doesn't mean that those facilites were located to give adequate service to their intended market. To the extent that the facilites were not properly located to begin with, may have a great bearing in their later becoming surplus.
 
Two examples should suffice:
 
The Erie Railroad had a line up to Essex Fells, NJ from Great Notch, NJ called the Caldwell Line. There was adequate traffic on this line to justify the origin of a freight train to serve it out of Croxton, NJ Erie's Main Classification Yard in the New York Area in 1954. Pictures of Caldwell Line Freight trains from that period show that they mostly consist of coal hoppers. The primary receiver of freight on the branch was the Sanitarium at Cedar Grove, NJ or Overbrook which used the coal for its on site power and heat generating plant and interchange with the Morristown & Erie. The EL merger moved the interchange to the former Lackawanna and Overbrook quit receiving coal as well as local coal dealers on the Caldwell Line. The switch from coal heat to oil and natural gas clearly rendered this line obsolete from a freight perspective.
 
Northern New Jersey Commuter Train Service tended to terminate on the Jersey Side of the Hudson River with the exception of the PRRs Northeast Corridor Commuter Service. The West Shore Line Commuter service ran up to Haverstraw, NY from Weehawken NJ. Commuters bound for New York City had to transfer from their trains at Weehawken to ferries for the remaining trip to New York. The Port Authority of New York & New Jersey began building highway bridges and tunnels between New York and New Jersey in the 1920s. With the opening of the George Washington Bridge usage of the West Shore Route began to decline in free fall the service was abandoned in the late 1950s. In short the construction of superior competing facilites by the Port Authority rendered the Jersey Terminal Facilities of the railroads obsolete.
 
Back to management:
Many of the Waterfront Terminals built by New Jersey Railroads never obtained a high usage rate. In otherwords the railroads overbuilt their facilities. For example the Erie Railroad originally terminated its trains at the Pennsylvania Railroad's Exchange Place Terminal. The Erie grew dissatisfied with the handling it got at Exchange Place and opted to build its own facilities at Pavonia Avenue. The DLW shared facilities at Pavonia Avenue with the Erie than opted to build its own at Hoboken because it became dissatisfied with its arrangement. What emerges from this is facilities in the Northeast got built because the managements of the railroads could not work out satisfactory joint facility arrangements. Why?
 
The situation is similar with the airline industry which maintains separate reservation systems for each carrier. Airlines because they can not agree on a common reservation system all use their own different ones. The question that should be asked is this. Is the Airline Industry Stronger because it could not agree on a common reservation system or is it weaker? To the extent that Eastern Railroaders could not consolidate facilities and coordinate their services into New York City did this make them stronger in the long run or weaker?
 
Take political lobbying. The Railroads have their own lobby group the AAR, the Steel Industry has their own lobbying group and down the line. Each industry has its own competitive interest to be sure but the fact is that the welfare of America impacts them all. There is no evidence to this writer that American Business has ever been able to get together and come up with a political agenda that can benefit them all theoretically they should be able to agree on common agenda items but they don't.
 
This gets things started


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photoman475
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Re: The failure of the Eastern Railroads
 
« Reply #1 on: Jan 20th, 2010, 9:23am »
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This is an interesting start, and I would suggest that one consideration has been left out: technology.
 
As an example, when many of these lines were built, the technology of the time meant wood burning locomotives.  As coal powered locos became more available, this meant increased efficiency.  However, this is offset by the increase in train length, car size and the switch to steel cars.  
 
Of course, there is the switch from steam to diesel-probably the fastest technology change in railroading history.  Railroad management used this switch to slash labor costs-all of a sudden, you didn't need boilermakers anymore if you don't have steam locos!  
 
One of the costs-and perhaps the easiest to try and control-is labor.  I think the railroads adopted technology in places where they could reduce costs the fastest-after all, trying to control taxes in New Jersey was never an easy proposition!  
 
Just an idea to throw in.


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HwyHaulier
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Re: The failure of the Eastern Railroads
 
« Reply #2 on: Jan 20th, 2010, 11:04am »
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HSSRAIL -
 
Consider the dreadful and relentless impacts of inflation (debasement of the currency) post WWII. The regulatory structure did not adapt  
to it well, if at all...
 
A result was protracted, depressed pricing on NY/NJ Commute movements. Because they were nice guys, the railroads had to "eat it".  
Though it is a poor analogy. Actually, full fares compensated by endless attacks on the values of the various lines equity shares. That  
lasted until the lines went broke! And, so, the now long held "past practice" of cut rate, less than costs of service tickets to ride...
 
The "excess capacity" possibility is interesting, I suppose, but tends to work itself out over time. Example: A time arrived where B & O  
found the NY/NJ problems so overwhelming, it sent in some trusted "hatchet men" to close poor performing assets...
 
...................Vern...............  


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HSSRAIL
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Re: The failure of the Eastern Railroads
 
« Reply #3 on: Jan 20th, 2010, 1:44pm »
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The regulatory environment is something that comes up a lot. The fact is that a lot of business people even railroaders were very comfortable with it. That regulators could be successfully challenged was demonstrated when the Southern Railway fought successfully to lower rates on grain shipped in big john hopper cars. Now why would people be comfortable with a status quo that wasn't really working? I am not totally convinced that the regulatory structure was the only problem I think there was also a mindset problem.
 
Most of the Executives who were at the top of the Class I railroads had been born in the 1900-1920 range.
 
The principle events they experienced would be:
 
The 1918 Influenza Epidemic
World War I
Unlimited Economic Prosperity & Growth
The Great Depression
World War II
 
Thrown into this is a persons religous backround and upbringing. For example a person who was raised in a very authoritative environment may react to that thru rebellion and as an adult seek out inovation or change or become stubborn and inflexible. Experiences and background made a big difference in how executives made their decisions and why?
 
For people caught in the Depression most survived by cutting back retrenchment. If things are going badly pull back on capital investments hunker down merge with competitors etc. There are many situations where such an approach leads to success. The eastern railroads needed to reduce surplus track but they also needed to improve their services to be more competitive with trucks. A pull back mentality could cause serious problems here. Also, adding to this problem was the instensity of the cold war which I think created an environment in which well we better not do anything until we see how things shake out. Railroads and their customers were not psychologically ready to challenge the regulatory environment even while they complained about it vigorously? This is an interesting topic?
Hopefully, some people who lived thru these times can provide some enlightenment here.
 
Now, for a live fire scenerio.
 
The Pennsylvania Railroad chose to do all of its interchane with the New Haven via carfloat Harimus Cove to Bay Ridge, Brooklyn. The fact is the PRR could have eliminated this costly operation short of the Penn Central Merger by hauling NH traffic to Phillipsburg via the Bel Del and use the L&HR Railroad to facilitate the interchange. This would have ment that the PRR would short haul itself this concept had a great deal of orthodoxy at the time. From a business standpoint the issue would be what would have been cheaper a division with the L&HR or carfloating across New York Bay. I don't actually have those cost figures on how much it cost to float a car to Bay Ridge so I don't know?


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HwyHaulier
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Re: The failure of the Eastern Railroads
 
« Reply #4 on: Jan 20th, 2010, 2:03pm »
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HSSRAIL -  
 
Good Heavens! Info Overload!
 
You cited the S R S contributions to the process. Much like Adm. Layton (in book about Pearl Harbor), "And I Was There!". We must  
not overlook the fact that S R S prided itself on being a firebrand. It chose to "...boldly go..." and take on the iconic ICC. With its own  
fortress and battlements on K Street, NW, it was well prepared to deal with the local annoyance. Few other carriers would have found  
the spine to do it.....
 
Carriers (your PRR example) and dealing with diversion to highway. The lines were well on their way to provision of "one bill" services  
through their own controlled motor carriers (bus and truck). It wasn't their fault they could not continue with it. Here, it is all the short  
sighted (ignorant and politicized) Motor Carrier Act, 1935 that restrained rail ownership.
 
Rail line "short routing" itself? That was rare, regardless all other circumstances. Yeah, it looks neat on paper how to divert from  
direct PRR - NYNH&H interchange. Problems being: Reflexively, they wouldn't do it. And, follow the money and see who may have  
been in bed with whom. The carrier relationships were not happenstance...
 
........................Vern....................


« Last Edit: Jan 20th, 2010, 2:06pm by HwyHaulier » Logged

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George_Harris
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Re: The failure of the Eastern Railroads
 
« Reply #5 on: Jan 20th, 2010, 8:15pm »
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Dont' recall the where, and certainly do not know how accurate, but:
 
I saw somewhere that even the best of innovators and visionaries were wrong about 1/3 of the time, sometimes more.  The question was, do their winners out weigh their losers?  
 
The other side is that failing to be innovative will always be a losing proposition in the long run.  
 
The unfortunate thing is that too many of hte northeastern lines seem to operate on the if in doubt, do nothing mode.  Thus a lot of the time they ended up not taking on board cost saving innovations until long after they became standard elesewhere.  their unions also needed to bear a goodly portion of the blame.  They tended to treat the northeast companies as if they had an open pipeline to the Bureau of Engraving demanding continuation of jobs long rendered useless even after the red ink was flowing.
 
The age and long term prosperity of the northeast led to a lot of excess in rail mileage as well.  This was avoided to a considerable extent in the southeast to post-War Between the States poverty.  A lot of lines that were proposed were never built because it was simply financially impossible.


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HwyHaulier
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Re: The failure of the Eastern Railroads
 
« Reply #6 on: Jan 21st, 2010, 7:51am »
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on Jan 20th, 2010, 8:15pm, George_Harris wrote:       (Click here for original message)
...I saw somewhere that even the best of innovators and visionaries were wrong about 1/3 of the time, sometimes more.  The question was, do their winners out weigh their losers?...    

 
George -  
 
Betcha' today's highest of the high tech firms feel lucky when they get the success rates noted in your maxim! The classic (at least it was  
taught in grade schools years back), perhaps, the endless attempts of Thomas Edison until he attained a working electric light bulb...  
 
Your faithful reader will infer you are saying a well run railroad always needs a good R & D budget, too... There's a good bit of support for that,  
when we recall the now gone lines and their own work in numerous advances...
 
.................Vern..............


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photoman475
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Re: The failure of the Eastern Railroads
 
« Reply #7 on: Jan 21st, 2010, 8:22am »
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HSSRAIL:
 
I like the list of events that you put together about the top executives.  The only one I have to question it the unlimited prosperity.  Do you mean the post WWII era?  Or are you also including the post WWI-era as well?
 
Alan


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HSSRAIL
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Re: The failure of the Eastern Railroads
 
« Reply #8 on: Jan 28th, 2010, 11:55pm »
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Presidents
 
William White,  DLW, NYC, DH  born 1897 in Midland Park, NJ.
Perry Shoemaker  DLW, Jersey Central, born Elmira, NY 1906
James M Symes, PRR born 1897
Alfred E Pearlman, NYC, PC born 1903
Earl T. Moore, CNJ, born 1898
Cedric .A. Major, LV, born 1892
Robert E Woodruff, Erie, born 1884
Paul W. Johnston, Erie, born 1892
Joseph A. Fisher, RDG, born 1895
Stuart T. Saunders, NW, PRR born 1909
Ralph E Sease, NYSW born 1905
George Albert, NH born 1898
Patrick McGinnis NH, BM born 1904  
 
The principle events are what readily came to mind you can add to the list if you want. Unlimited prosperity was the "Roaring Twenties".
 
There was another point brought up about the fact that many eastern railroads were built in the woodburner era and the tracks were not designed for subsequent developments. My opinion on that is as follows:
 
There are a lot of people out there who are very good about selling their ideas but less capable of implementing them. In order to use heavier rolling stock the tracks were upgraded to take that equipment. A line alignment its grades and curves were a factor of how well the initial route was surveyed. James Edgar Thompson surveyed the Horseshoe curve in the 19th century and that route has never had to be re-surveyed. Many railroads were threaded to areas that agreed to finance the venture. Over time some railroads have a continued program of gradual curve and grade easement. In some cases it was possible that the company was able to build out of their worst attributes but not always in that case the engineer really earns their paycheck.


« Last Edit: Jan 28th, 2010, 11:59pm by HSSRAIL » Logged
George_Harris
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Re: The failure of the Eastern Railroads
 
« Reply #9 on: Jan 29th, 2010, 12:14am »
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on Jan 21st, 2010, 7:51am, HwyHaulier wrote:       (Click here for original message)

Your faithful reader will infer you are saying a well run railroad always needs a good R & D budget, too... There's a good bit of support for that,  
when we recall the now gone lines and their own work in numerous advances...
 
.................Vern..............

Vern:  I think I got my fraction backwards.  I think the real number was right 1/3 of the time.  
 
Some things need an R&D budget.  Mostly what is important is an R&D mindset.  That is, a mind that looks at the way something is and is done and say, "How can I do this better / cheaper / easier / with fewer pieces / require less maintenance / etc.?"  It is also good to be able to look at something and say, "why was that done the way it was done?"  Maybe there is a good reason that you do not see, maybe it was considered a good way at one time but events since have shown a better way, and maybe it was somebody's pet idea and never was a good way to do it.  
 
After going through the above thought process, then maybe it is time to give it some R&D budget so it can be proven right or wrong before big bucks are spent.  It is very important to avoid $10.00 solutions to $5.00 problems.


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