The Experiment Begins

Early last Thursday morning, freight train B-6 from Enola, Pa., rumbled through a steady drizzle into position at the big Potomac switching yard south of Washington. "Just another working day," said Conductor Carroll Dikeman as he headed home. Well, not quite. Train B-6--along with nearly half of the other trains and 17,000 miles of track in 16 Northeastern and Midwestern states--had just become the property of the Consolidated Rail Corp., a Government-sponsored private company. ConRail's birth marks the largest corporate reorganization ever.

The new company also inherits the nation's largest railroading headache. By far its biggest component is the bankrupt Penn Central line, which six years of effort and about $800 million in federal grants and unrepaid loans have not restored to health. ConRail also now owns the Reading, Erie Lackawanna, Central of New Jersey, Lehigh Valley and Lehigh & Hudson River lines. Altogether, the six lines lost almost $2 million a day last year. But they carried too much freight (20% of the nation's rail total) and too many passengers (428,000 a day) to be allowed to die.

Unscrambled Routes. A new federal agency, the U.S. Railway Association, has tailored ConRail to make the best of this difficult situation. U.S.R.A. planners first unscrambled a spaghetti-like jumble of freight routes to find the combination with the most profit potential. That meant abandoning 3,000 track miles completely and operating another 3,000 miles of lightly used track only with Government subsidies. Next the planners got Congress to approve $2.1 billion in federal loans; that money, with another $4.7 billion in expected revenues, will be used over the next decade to upgrade tracks and buy new trains. Because ConRail cannot possibly turn a profit until 1979--if then--repaying the loans will take decades.

Before then, several problems threaten to derail the bold experiment. Stockholders and creditors of the six bankrupt lines have vowed to fight for higher compensation for their property, which could boost the eventual payout well above the $685 million in stock that ConRail is now offering them. Pressure from local politicians might force Con-Rail to keep unprofitable segments of line in service. Then there are labor difficulties. By refusing to give up archaic rules and procedures, railroad unions have aborted a planned $66 million sale of almost 2,700 miles of track to the profitable Southern and Chessie railway systems, thus saddling ConRail with a bigger system than it wanted. But for all ConRail's troubles, there is no present alternative to it: no one has been able to think of a better way to save the Northeast's railroads.

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