Let Them Eat Cake

The Supreme Court this week will begin to ponder the most significant railroad case to reach it since Teddy Roosevelt 65 years ago successfully fought J. P. Morgan and James J. Hill by contesting what has come to be called the Great Northern case. The question before the Justices: whether, and on what terms, to approve the merger of the Pennsylvania Railroad and the New York Central into a $6 billion line stretching over 20,000 miles of track that would represent the largest private rail system in the world. By coincidence, the week also marks the fifth anniversary of the occasion on which the Pennsy and the Central formally announced their plans. The fact delaying lengthy legal battles four times since have stalled the merger is an indication of what is backwardly wrong about U.S. railroads.

$225,000 a Day. The fault is not with the two railroads themselves. Having negotiated for nine years before they finally reached agreement, the Pennsy and Central knew what they wanted to do. Yards and lines were to be gradually integrated, freight schedules speeded up, and the work force gradually trimmed by 5,000 a year through death or retirement. On the basis of what they expected to save by merging, the two estimated that they were losing $225,000 a day because of the delay. Meanwhile, 3,100 workers have been furloughed, and planning is snarled because neither road wants to lay out money on facilities that do not figure in the joint operation.

The delay, which will continue at least until spring because of the Supreme Court hearing, is the doing of other northeastern railroads that would be affected by the merger. The ICC, in unanimously approving the Penn Central, ordered it to continue doing business with smaller railroads and to indemnify them for losses because of the merger. Ultimately, all are likely to find a place in a second big merger between the Norfolk & Western and the C. & O.B. & O. But the smaller lines, notably the Delaware & Hudson, Erie-Lackawanna and Boston & Maine, have taken to the court their vigorous protest about the Penn Central merger.

"Nothing to Lose." Pennsy Chairman Stuart Saunders lays most of the blame squarely on the railroad he formerly headed: the Norfolk & Western. "A campaign of delay is being conducted in good part by the Norfolk & Western Railway," Saunders told the Pittsburgh Chamber of Commerce recently. "With everything to gain and nothing to lose, the N. & W. seems to want to prolong as long as it possibly can the tremendous competitive advantages gained from its own merger with the Nickel Plate and Wabash, which has been in effect for more than two years." Saunders called the N. & W. "the Marie Antoinette of the 20th century," telling every other railroad to go eat cake. But the N. & W., said he, already has much of the cake. "By all odds, it is the most profitable railroad in the world and it has a built-in efficiency and profitability that no other road or combination of roads in the East can ever jeopardize."

Some blame for the stall rests with the archaic ICC, despite its unanimous backing of the Penn Central. The commission made a basic mistake by taking up the eastern mergers piecemeal instead of together. This made it possible --and probable--that every other railroad would commence to scramble for position. There are indications, however, that even the hoary ICC is changing. Last month Commissioner William H. Tucker, 43, a onetime paratrooper who is not afraid to jump into railroad battles, moved into the chairman's job. Tucker has long argued against the case-by-case approach. "The public," he insists, "should not have to wait half a generation for a railroad merger to be decided." Last week, under the new chairman's goading, the ICC announced that it will soon take up the N. & W. merger with the C. & O.B. & O. It will also reconsider the merger proposal of the Burlington, Northern Pacific and Great Northern, which was voted down narrowly (6-5) by the ICC last year. This was by another coincidence the 1902 merger on which Teddy Roosevelt staked his fight.

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