Profits & Perils

Nowhere has the purposeful spreading out of work to make jobs been more conspicuous than on the railroads, and nowhere has the Government tried harder to end such "featherbedding." Last week--after two earlier U.S. presidential boards had wrestled with the problem--a congressionally appointed panel awarded the railroads a signal victory. In the first peacetime arbitration ever imposed by Congress, the board ruled that almost all of the 33,000 firemen who work aboard diesel-powered freight and yard trains are "not necessary" and should be gradually phased out.

For all the sweep of the ruling, few men actually will be fired. The board decreed that all those with more than two years' service should be retained as firemen or given other jobs. This gesture did not satisfy the two union members on the seven-man board, and they plan to contest the decision in the U.S. courts. Even if the courts uphold the board, the decision is binding for only two years. In addition, union negotiations for wage hikes, scheduled to start this week, have a Feb. 24 deadline. Unless the railroads give in some on the issue of work crews, says Firemen's Union Chief H. E. Gilbert, "we may strike."

Careful Downplay. Despite such potential roadblocks, the decision was hailed by railroaders, whose fortunes are improving after a long slump. From 1955 to 1961 the profits of the 102 Class I railroads sagged from $921 million to $382 million. In the past year or so, however, the railroads have begun to hum along again. This year their revenues will rise 2% to $9.6 billion, and profits will jump 10% to a six-year high of $630 million.

Railroaders are going out of their way to downplay their improvement, for fear that it will add to wage demands, make the Interstate Commerce Commission less willing to permit rail mergers, and stall the railroads' drive for relief from high city and state taxes. Railroaders argue that their profit picture has been artificially brightened by the new 7% investment tax credit and liberalized depreciation rules, which together added more than $100 million to railroad earnings in 1962. Though freight revenues are running 2.5% ahead of 1962, railroaders also point out that passenger revenues will slide 4% this year (to $600 million) and that 24 big railroads are still in the red.

Car Shortage. But the fact is inescapable that the general expansion of the economy has raised earnings while better equipment has lowered costs. In Midwestern harvest areas, the railroads need 12,000 more cars than they have to carry the load. At the same time, such innovations as larger freight cars, more powerful locomotives and automated yards are enabling the railroads to win back much of the market lost to truckers. Last month the Western Maryland and the Reading railroads showed off an electronic scale that can weigh individual cars in a moving train. By doing away with the need for stopping and uncoupling each car for weighing, the scale may save the industry as much as $500 million yearly --an amount almost equal to what it estimates the costs of featherbedding to be.

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