Railroad Rumpus

Although Pennsylvania with its heavy coal and iron industries originates upwards of 20% of U. S. railroad traffic, not for the first 45 years that the Interstate Commerce Commission was in action did it have a Pennsylvania member. In 1933 President Roosevelt remedied this state of affairs and did his political ally. Senator Joseph F. Guffey of Pennsylvania, a favor by giving an I. C. C. berth to Senator Guffey's brother-in-law Carroll Miller. Mr. Miller, a lanky six-footer whose lantern jaw, stooped shoulders and pince-nez make him look like a schoolmaster and whose extraordinary drawl and dry wit sometimes make him sound like a Will Rogers type hayseed, hails from Richmond, Va., has spent most of his 62 years running utilities in the U. S. and Japan. Since marrying Mary Emma Guffey in 1902, he has made Pittsburgh his headquarters, is currently president of Thermatomic Corp., has a 245-acre farm at Slippery Rock.

Carroll Miller's experience had given him practically no knowledge of railroads, and railroad men therefore considered him the weakest I. C. C. member. Today they give him credit for being serious and hard-working and since he is now I. C. C. chairman (by virtue of annual rotation of that office) they listened with attention last week when he rose to speak in Salt Lake City's Hotel Utah before 350 delegates to the 49th annual convention of the National Association of Railroad and Utilities Commissioners. "The logical solution of the railroad difficulties," he drawled, "seems to be one national railroad system. Such a system should result in a simple rate structure, no differently rated territories, uniform tariff classifications, transportation wastes reduced to a minimum, and many other manifest benefits. . . ." More significant were other remarks by Chairman Miller on the matter of railroad freight rates. Without particularizing, he declared that the I. C. C. is conducting an intensive study of the rate problem and that he himself favors a new system based solely on costs of operation instead of the present system of what the traffic will bear.

Thus brought to the fore was the most ominous U. S. railroad situation since government operation during the War. Railroad men generally believe that it is impossible to rearrange the rate schedule on the basis solely of operation costs because these vary strikingly in different territories. And some railroaders assert that the traffic may not be willing to bear a sizable rate rise. In any case, as a whole the U. S. railroads are desperately in need of more net income, although last year, after deduction of $500,000,000 fixed charges it amounted to $164,0130,000, a gain of 200% over 1935. This was due largely to a 15% rise in freight traffic. Assuming that this rate of increase would continue, the I.C.C. on January i discontinued the emergency freight rates which had produced about $120,000,000 a year revenue. By last week, however, it was readily apparent that the rate of increase in earnings had not continued and the roads were facing a number of huge increases in operating costs.

In the first six months of 1937 net earnings reached $528,000,000 against $451,000,000 last year. But since March the increase in earnings has been slowing down. Spurting sharply in January, February and March, revenues then slumped under the impact of floods and strikes. In June net earnings actually dropped below those of June 1936. Freight loadings in the first quarter were up 15.5%, in the second quarter 12.9%, in July 7.2% and in the first two weeks of August only 5.3%.*

Meanwhile railroad operation costs have jumped on four fronts this year: 1) Cost of materials and supplies, particularly coal, are up about 12%, or $125,000,000. 2) Taxes, including those under the Social Security Act and pension laws, have risen $70,000,000. 3) New State laws, such as those limiting train length and increasing train crews will cost $12,000,000. 4) A 5-c--an-hour pay raise granted Aug. 1 to 750,000 non-train railroad workers (clerks, signalmen, etc.) will cost $100,000,000. The five big brotherhoods of railway trainmen for a month have threatened to strike unless given a 20% raise. This would add $116,000,000 a year and the roads have refused point-blank to grant the full amount on the grounds that these workers are already very well paid./- A raise similar to that given to all other employes would cost some $30,000,000 yearly.

If all these increases went into effect, they would cost the roads $639,000,000, or 95% of last year's net operating income. One-third of U. S. railroads are already bankrupt and others hard-pressed to meet their fixed charges alone. Said Railway Age: "Unless the series of developments now rapidly tending to bankrupt virtually the entire railway system of the U. S. is immediately arrested, the American people may suddenly awaken to a realization that government ownership and operation of railways have become almost or actually unavoidable."

Last week government ownership of railways finally went completely into effect in France when the Popular Front Government took over control of six private roads, merged them with two other lines the nation already operated. Since 1931 France has underwritten some $1,050,000,000 annually in losses for these six private systems. In the future the government will hold 51% of the new capitalization, including a $1,046,000,000 assessment for the private lines, and private shareholders will have virtually no say in their operation.

*Aggregate car loadings in the first six months of 1937 were 18,900,000, well above 1936's 16,400,000, but still far below the 25,500,000 of January--June 1929. /- In England, railroad workers lately negotiated a raise making their minimum pay $10 a week.

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