The Penn Central Transportation Company
The Penn Central Transportation Company, commonly called the Penn Central, was a Class I railroad company headquartered in Philadelphia that operated from 1968 until 1976. It was created by a merger in February of 1968 that included the Pennsylvania Railroad and the New York Central Railroad. Later on, the New York, New Haven & Hartford Railroad was added to the merger. This took place in January of 1969. Sadly, the new company had to file for bankruptcy by 1970. Also, by the end of 1970, the Penn Central was operating 20,083 miles of road and 40,985 miles of track. These figures do not include the P&LE and the PRSL. 83,955 million ton-miles of revenue freight and 3,158 million passenger miles were reported by the Penn Central that same year. The PC operated in the states of Illinois, Indiana, Michigan, Ohio, West Virginia, Pennsylvania, New York, New Jersey, Maryland, Delaware, Connecticut, Rhode Island, Massachussetts, Washington, D.C., and the Canadian provinces of Ontario and Quebec.
The Penn Central was formed when the three aforementioned railroads were faced with seemingly insurmountable financial challenges in the late 1960s. With their main service area in the densely populated northeast quadrant, these railroads relied mostly on commuter and passenger rail service and labor-intensive, short-haul freight. All which faced competition from automobiles, buses, and trucking. When Congress had passed the Federal-Aid Highway Act of 1956, construction of the massive Interstate Highway System had given a huge economic boost to the trucking industry.
With the inability to respond to current market conditions and heavy ICC regulation, the railroads were not allowed to change both the rates it charged shippers or passengers. Cost reduction seemed to be the only way to survive and become profitable, but again, ICC regulations restricted what cost-cutting measures could take place. A merger was then thought to be the only way out of a very difficult financial situation.
The New York Central Railroad (NYC) and the Pennsylvania Railroad (PRR) had been in a strong business competition for a very long time. Each of the railroads had equipment and trackage that was not being used to capacity, but the NYC was in much better condition. Although both railroads had a very heavy passenger business, neither one was earning very much money. Merger talks had been announced as far back as 1957, and the industry reaction was utter disbelief. Almost every prior merger proposal for many years were structured to pit the NYC against the PRR, thereby creating anywhere from two to four somewhat equal systems in the eastern U.S. Traditionally, the Pennsylvania Railroad had been allied with the Norfolk & Western Railway (N&W) and the Wabash Railroad (WAB). The New York Central by tradition was allied with the Baltimore & Ohio Railroad (B&O), the Reading Railroad (RDG) and the Delaware, Lackawanna & Western Railroad (DLW). The remaining railroads were always paired with the Nickel Plate Road and the Erie Railroad. Also, the typical tradition was for end-to-end mergers rather than that of parallel railroads.
Classic Streamliners - TRAINCYCLOPEDIA
A Penn Central Transportation Company passenger train at Bay Head, New Jersey, April 18, 1971.
A Penn Central Slideshow. Photos by Roger Puta.
The merger took nearly ten years to plan and justify, and during this time the railroad scene began to change dramatically in the eastern United States. This change was largely attributed to the upcoming merger of the two lines. The Chesapeake & Ohio Railway (C&O) took control of the B&O, the N&W acquired the Nickel Plate Road and the Wabash, and the Erie railroad merged with the DLW to create the Erie Lackawanna Railway (EL) in 1960. The Penn Central (PC) finally became reality on February 1, 1968. Here’s how it actually came about: incorporated in 1846 as the PRR; it changed its name to Pennsylvania New York Central Transportation Company on February 1, 1968, after merging with the NYC; and then took the name Penn Central Company on May 8, 1968. On October 1, 1969, it changed its name again, this time to Penn Central Transportation Company, becoming a wholly owned subsidiary of the new Penn Central Company, a holding company. Stockholders approved the merger of the two railroads on May 8, 1962, but it took almost four years until the ICC finally approved the merger. There were a few conditions attached: The new Penn Central had to take control of freight and passenger operations for the New York, New Haven & Hartford Railroad (NH). This happened on December 31, 1968. The Penn Central was also directed to acquire the New York, Susquehanna & Western Railway (NYS&W).
This never happened, as the Penn Central and the NYS&W could not come together on a price. Ultimately, the NYS&W was to become part of the Delaware Otsego System. The Penn Central also had to make the Lehigh Valley Railroad (LV) available for merger by either N&W or C&O or, if neither railroad wanted it, merge it into the PC. Sadly, the LV struggled financially on its own, entering bankruptcy itself a mere three days after the Penn Central did. Sadly, the merger failed miserably. An implementation plan for the merger was drawn up, but never carried out. All attempts to integrate the two operations, personnel and equipment were extremely unsuccessful, and this was primarily due to clashing corporate cultures, incompatible computer systems and union contracts. Little if any real planning had been given to unifying the two railroads, and they both had very different styles of operating. In the ten years before the merger, the NYC had trimmed its physical plant and put together a young, eager management group that was led by Alfred E. Perlman. The PRR, ran by Stuart T. Saunders, was a much more conservative and traditional-type operation. Much of NYC's management (known as the "green team") saw that the PRR (the "red team") were dominant in the Penn Central’s management and soon left for other positions. Those who left often said that the problem was the two different corporate philosophies: NYC stated they were in the transportation business, while PRR said that they were in the railroad business, and the two could never merge successfully.
On top of the merger problem was the fact that the industrial states of the Northeast and Midwest had become known as the rust belt. Industries closed down and relocated, and railroads found themselves with excess capacity. The PRR, for instance, was worse than practically any other railroad for having anywhere from four to six tracks where only one or two would do. This track was no longer needed but it was still on the tax rolls. West of the Allegheny Mountains, the two railroads duplicated each other at almost every major point, but east of those cites, the two rarely touched. In addition, sub-par track conditions were deteriorating even further, a direct result of inheriting decrepit facilities. Trains had to operate at greatly reduced speeds, thus resulting in delayed shipments. Railroad personnel regularly worked excessive overtime and sent operating costs soaring. Wrecks and derailments were happening regularly, especially in the Midwest. Then, in 1969, most of Maine's potato production rotted in the Penn Central's Selkirk Yard. Sadly, this incompetent act ultimately ruined the Bangor & Aroostook Railroad, whose shippers swore they would never ship by rail again.
The Penn Central formed a holding company (The Penn Central Company) in an attempt to diversify the financially troubled firm into non-railroad ventures such as real estate and other businesses, but in a poor economic climate these business ventures performed no better than the railroad assets. Additionally, these new subsidiaries sidetracked management attention away from the real problems within the core company. The administration also insisted on paying dividends to its shareholders in order to maintain the false impression of success. The company found itself borrowing additional money to sustain operations. The interest on loans had become an insupportable financial burden.
Both the Pennsylvania Railroad and the New York Central came into the merger financially solvent, but the Penn Central’s first year of operation saw a loss of $2.8 million, which would be well over 18 million dollars in today’s money. By 1969 the shortfall was nearly $83 million, or substantially over 500 million dollars in today’s funds. The Penn Central's net income for 1970 was a deficit of $325.8 million, or nearly 2 billion dollars in today’s currency. By June 21 of the same year, the Penn Central had entered into bankruptcy procedures. The nation's sixth biggest corporation had become the largest bankruptcy ever in the United States. Sadly, the Enron Corporation's debacle and bankruptcy in 2001 passed the PC’s by a great measure. Even though the PC was now in bankruptcy, the parent Penn Central Company continued to exist. In 1972, the destructive effects of Hurricane Agnes further hindered the PC’s operations by wiping out several key branches and main lines. In May of 1974, the court deemed that the Penn Central would be financially unable to reorganize. The United States Railway Association, a U.S. government corporation, was created under the requirements of the Regional Rail Reorganization Act of 1973 to develop an arrangement that would save the Penn Central
. On April 1st of 1976, the U.S. Government-owned Consolidated Rail Corporation (Conrail) then acquired all of the railroad properties and operations of the Penn Central along with six more railroads including the Central Railroad of New Jersey, the Erie Lackawanna, Lehigh & Hudson River Railway, the Lehigh Valley, Pennsylvania-Reading Seashore Lines, and the Reading Railroad. This action was a large step in the direction of the nationalizing U.S. railroads, something that had not been seen since World War I (other than the creation of Amtrak in 1971). Amtrak also began operating an abbreviated passenger service on Penn Central trackage in addition to other U.S. railroads.
The Penn Central also had been participating in two separate passenger service experiments with the U.S. Department of Transportation. Both of these experiments were designed to upgrade passenger service along the Northeast Corridor. Between New York City and Washington, D.C., the Penn Central continued the Metroliner experiment that the Pennsylvania Railroad and the US DOT had started, which was rapid electric-powered trains that were projected to reach a maximum speed of 160 mph. The launch of the project was postponed several times, and when it finally started, it was never publicized in The Official Guide. The Metroliner was not a total triumph, but it did turn around a long decline in ridership on the New York to Washington run. The Boston to New York run used a United Aircraft TurboTrain in an attempt to improve on the 3-hour and 55 minute-long running time of the New Haven's express trains of the early 1950s. Information on TurboTrain’s schedule was even trickier for the public to acquire than the Metroliner timetables.
The combination of untested equipment, deteriorated track, and the general strangeness of new technology and conventional railroad thinking made the new services the brunt of substantial jokes. A large portion of the Metroliner cars were in storage for a while, and then Amtrak transformed them into cab control cars for Harrisburg-New York Keystone Service in 2007. The entire lot of TurboTrains were scrapped. In the face of sustained loss of market share to the trucking industry, the railroad industry and the unions were forced to ask the federal government for deregulation. The 1980 Staggers Act deregulated the railroad industry and was a major factor in resuscitating the Conrail and the old Penn Central assets. After deregulation, Conrail finally had the strength to apply the route reorganization and efficiency improvements that the Penn Central had tried in vain to implement from 1968 until 1970. Hundreds of miles of previous PRR and NYC trackage were abandoned to neighboring landowners or rail trail use. In 1987, Conrail stock was again floated on Wall Street and the company operated as an independent, private-sector railroad from 1987 to 1999.
The Penn Central bankruptcy was a devastating event, both to the railroad industry and to the nation's business community. The mammoth railroad's short-lived existence has not been looked upon in a very positive manner by either railroad historians or by former employees, and not much for the Penn Central Railroad enthusiast has been in print. The preservation group Penn Central Railroad Historical Society was formed in July 2000 to preserve the company’s history.
For the 30th anniversary of the Norfolk Southern Railway being formed, the company decided to paint 20 brand-new locomotives in the design and colors of predecessor railroads. Norfolk Southern No. 1073 is an EMD SD70Ace and was painted into the standard Penn Central color scheme. It made it’s debut on June the 25th of 2012.
Text: wikipedia.org. Images: Public Domain; http://www.commons.wikimedia.org (unless otherwise specified) and 17 U.S. Code § 107 fair use. References: Lewis, Robert G. The Handbook of American Railroads. New York: Simmons-Boardman Publishing Corporation, 1951, 2nd Edition 1956. Site Map Contact webmaster HERE.
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