Business: THE NEW AGE OF RAILROADS

IN Erie, Pa. last week, Alfred E. Perlman, president of the New York Central Railroad, ushered in a new symbol of 20th century progress for his venerable old line. Throwing a switch on a signal box (see cut), he formally opened a new 163-mile, electronically regulated stretch of double track between Cleveland and Buffalo. With the new system, the longest in the U.S., only two men seated before a light-studded control panel at Erie can automatically control all traffic between Cleveland and Buffalo.

Instead of the old four-track main line, the Central’s electronic system needs just two tracks, will be able to shunt swift express trains around rumbling freights by cross-over switches every seven miles, also step up the speed of freight trains from 30 to 60 m.p.h. The dispatchers can also send passenger trains hurtling east and west at 80 m.p.h. on the same track, switch one to the opposite track to pass. Cost of the Central’s electronic progress: $6,238,000 for the first step, as much as $50 million by the time it extends the new system along its entire New York-Chicago main line. In return, the Central will be able to cut its number of tracks in half, save millions on taxes and maintenance. Says President Perlman: “Through electronics, we are now able to control more traffic faster, better and more economically than ever before.”

The Central’s installation of pushbutton traffic controls is only the latest example of a great revolution sweeping U.S. railroads (see color pages). Since World War II, the industry has poured some $12 billion into new engines, new tracks and trains, a host of futuristic electronic gadgets. As a result of their increased efficiency, the 113 Class 1 U.S. railroads (more than $3,000,000 annual revenue) have been able to cut their road mileage from 249,000 mi. in 1929 to about 220,000 mi. today, the number of locomotives from 61,300 to 34,000, the number of freight cars from 2,600,000 to 2,000,000, the number of employees from 1,600,000 to 1,000,000. But by getting vastly more work out of man and machine power, railroaders have been able to boost the total amount of freight by 45% to 650 billion ton-miles in 1956. And that is only the beginning: in the next ten years, the industry expects to spend $20 billion more for modernization to cut costs and boost volume even higher.

READY TO FIGHT

The new products of modern technology mark a radical departure from the 19th century, when railroads held U.S. transportation in virtual monopoly, and the public could be damned. Even as late as World War II, U.S. railroads had an antiquated plant far behind other industries. Cars, buses and planes started eating into passenger revenues; the booming young trucking industry, along with barges and fast-expanding pipelines, cut into freight traffic. Between 1943 and 1949 the railroad share of the $30 billion U.S. transportation market crumbled from 72% to 59%.

In the same period, railroads were caught in the postwar squeeze between wages and prices, and pre-tax profits for Class I roads dropped 68% to $700 million. Since then, largely because of their race to modernize, the roads have stepped up earnings, last year wound up with a $1 billion profit. Says Southern Railway President Harry de Butts: “Fifteen years ago, when trucking grew up and undercut us, nothing was said. But now we are ready to fight back.”

Gone are the old mossbacks whose railroads ran by steam and tobacco juice. Today’s operating man is younger and more flexible, an efficiency-minded innovator who spends his working hours figuring ways to apply 20th century technology to his 19th century railroad. A typical example is Downing Bland Jenks, trail-blazing 41-year-old boss of the Chicago, Rock Island and Pacific Railroad. Says he: “You don’t have to look 50 or 100 years ahead to see what railroading is coming to. We could operate our whole system automatically right now, if it weren’t for federal controls and union problems.”

The Rock Island’s Jenks is no dreamer. As a research-conscious vice president, who moved up to the presidency last year, he installed electronic gadgets in freight yards to check and sort cars faster, was the first to use lightweight, economical (seat cost: $2,300 v. $3,800 for standard cars) “Jet Rocket” trains, which are equipped with radio communications so that trainmen no longer had to drop notes to station masters from speeding trains. Jenks has even put to work the U.S. Army’s sniperscope, which uses infrared rays to see through darkness; a modified version keeps watch on car-axle journal boxes, flashes a signal when the box gets too hot. Coming soon on the Rock Island: centralized TV to keep an eye on crossing gates, plastic train wheels to cut down noise, electronic brains to handle railroad accounting chores.

RADAR & JETS

Other railroaders are learning to put the miracles of modern science to use—and are developing new ones on their own. Just as roads have switched over 90% from steam to diesel power, so they are now looking for ways to improve on the economical diesel itself. The Union Pacific was the first U.S. road to put to use a giant gas-turbine locomotive that burns a cheap grade of fuel oil, and can haul maximum-length freights (120 cars) at 65 m.p.h. Next year the Union Pacific will try out a newer model, which it hopes will burn an even cheaper fuel—powdered coal. Such roads as the Denver & Rio Grande Western are looking even farther ahead. Its staff of scientists has already developed an atomic signal lamp that will stay bright for twelve years by using radioactive isotopes, is also at work on an atomic-powered locomotive.

Because freight produces nearly 90% of operating revenue, the railroads are concentrating on ways to improve freight handling. The Pennsylvania, for example, is in the midst of a $34 million program to turn its 74-year-old Conway yard near Pittsburgh into the nation’s most modern electronic freight system, handling 9,000 cars daily from remote-control panels. Electronic brains made by International Business Machines will sort, classify, route and guide all freight cars from an inclined switching hump to their proper tracks automatically; electronic signals will operate all switches; electronic scales will record each car’s weight; radar-operated speed retarders will check the car’s wheels to be sure that each coupling is made at precisely the proper speed. Saving to the Pennsy: up to 50% in the time for freight cars to clear the yards, plus millions in wages paid to yard crews.

Every line is also at work on new families of specialized freight cars that cost up to $15,000 v. $5,000 for standard boxcars. The Santa Fe’s new 3,800-car fleet will have everything from airtight, plastic-lined produce cars to specially compartmented D-F (damage free) cars for fragile products.

On every road, the maddening clickety-clack of the rails is fading away. All future track on the Santa Fe will be made of welded rail in quarter-mile lengths for a quieter, smoother ride (and greatly reduced maintenance). Everywhere the familiar gandy dancer (i.e., track worker) is dying out; in his place a single machine pulls and drives spikes, tamps the ballast and raises and shifts track automatically. The railroad tie that once lasted ten years now lasts 30 years with new preservatives. On the Chicago, Milwaukee, St. Paul and Pacific, the lengthy job of taking the flat spots out of wheels, a process that once meant that the entire assembly—truck, axle and wheel—had to be disassembled, is now accomplished by a $150,000 wheel-trueing machine that operates like a grinding machine set at track level, smooths out wheels in one swift mechanized swoop.

U.S. railroads are also spending millions to woo more passengers. The Union Pacific, the Santa Fe, the Southern Pacific are all buying new air-conditioned dome cars, while such Eastern roads as the New Haven, New York Central and Pennsylvania are experimenting with low-slung lightweight trains that zip along at speeds above 100 m.p.h. So far. mass-production orders for the lightweights have been slow in coming; most of the experimental models ride poorly, are troubled with mechanical bugs. Until they are ironed out, Budd Co. is trying the opposite tack with standard-size but lighter-weight (85,000 Ibs. v. 135,000 Ibs.) cars utilizing welded frames, stainless-steel skins and plastic interiors. Last week the Pennsylvania ordered six of the new Budd cars, said it might order 44 more if they prove as good as their promise.

As always, railroaders grumble loudly about the cost of passenger modernization, complain that even the best trains often lose money. But every railroader is also well aware that good passenger service builds up good will that cannot be counted in mere dollars and cents. Illinois Central President Wayne Johnston, who has cut his passenger trains from 228 in 1935 to less than 50 today, makes sure that the survivors are super-trains. Says he: “If somebody told me to take the Panama Limited off my Chicago-New Orleans run, I’d say, ‘Don’t insult me.’ Any money we lose right now is made up by good will and advertising. It keeps the Illinois Central name before the public and gives them service they can’t get anywhere else.”

MONUMENTS INTO MILLSTONES

Despite all their advances, there is a practical limit to how much the railroads can accomplish alone. Railroaders complain bitterly that the Internal Revenue bureau’s taxmen take no account of their progress. The new diesels and freight cars are still depreciated at 20-year rates, but because of the industry’s rapidly advancing technology, they must often be junked in ten years or less. And the railroads are forced to pay many other taxes that competing industries avoid. While the New York Central’s stations were once monuments to prosperity, now they are millstones, costing far more to operate than they earn in tickets. To cut its losses the

Central has already put up 400 of its stations for sale, and many other roads want to get rid of their terminals.

Another big complaint is that airlines and trucks use public airfields and highways for a relatively small fee, while railroads must pay steep taxes and maintenance for every mile of rail. New Jersey alone collects an average $9,511 annually for every mile of line; the 13 railroads serving New Jersey pay $1.67 in state taxes for every $1 worth of business they pick up in the state. On top of that, railroadmen point to other special taxes, e.g., a federal railroad retirement tax, figured at of employee earnings v. only 2% for other industries, plus a 3% tax on freight shipments during World War II to discourage shipping on the overloaded roads, but never taken off.

The biggest single problem, say railroadmen, is the archaic system of regulations enforced by Interstate Commerce Commission. Says Pittsburgh & Lake Erie President John W. Barriger: “The ICC’s current rules are as economically stupid as 18th century medicine. They are killing the railroads. If General Motors had to wear our uniform in this league, it would be busted in two years.”

One trouble is that ICC is slow and hesitant to let railroads boost rates enough to cover inflated costs. Though U.S. roads have won 13 freight-rate increases since 1946, the hikes have only increased revenues per ton-mile some 45%, while wages jumped 130%, and material costs rose 80%. Another complaint is that ICC will not let the roads cut rates on products they can carry cheaper than competing trucks, thus tends to allocate markets and stifle free competition.

Railroadmen who try to lop off money-losing spur lines that no longer are really needed often have to run through months or years of hearings. The Chesapeake & Ohio, for example, consistently failed to get permission to discontinue a train that averaged only a handful of passengers daily. Finally the principal objector admitted that he did not ride the train himself; he just liked to set his watch by the train’s noon whistle. Regulatory agencies know that every road has similar lines that should be eliminated so that the money saved could be used to improve service elsewhere. But they are reluctant to pare the costs, because they want railroads as a stand-by service in case weather makes plane and car travel impossible. Sighs one railroader: “What we are is foul-weather friends.”

BY AIR & BY SEA

Looking to the future, the industry wants to compete with its rivals on even terms all across the board. Says Illinois Central President Johnston: “We should be in every mode of transportation.” Years ago the Illinois Central and the Union Pacific wanted to get into the airline business, but were turned down. Other roads are eager to get into barge lines and bus lines: the Erie, Lackawanna and a dozen other roads are anxious to merge to combine facilities and cut costs. The Southern Pacific has built a $35 million pipeline, first for the industry, to carry oil from Los Angeles to Arizona, is considering another $16 million line from San Francisco to Nevada. Southern Pacific President Donald J. Russell also has teams of geologists out combing the road’s thousands of acres of Western land, looking for oil and revenue-producing metals while the Santa Fe has already diversified with uranium, is fast becoming a major producer.

The Eisenhower Administration is well aware of the industry’s problems. In 1955, the Presidential Advisory Committee on Transport Policy flatly proposed that the law be rewritten to make clear that neither ICC nor any other Government body should undertake to allocate and divide the U.S. transportation market. Bills are brewing in Congress to modify ICC’s hold on the industry, and ICC itself proposes a list of 26 changes to streamline its operations and speed up rate hearings.

But until such help arrives, U.S. railroaders will have to go it alone. They know that they still have a big public-relations job to do before they can live down their past. As Central President Alfred E. Perlman says, “People think of the airplane in terms of heroes like Lindbergh. But when they think of railroads, they think of robber barons. We’re cursed with that reputation.” Yet as every U.S. railroad man also knows, the best way to win back both the public’s confidence and their lost markets is by more cost-cutting modernization and better trains. Says Chesapeake & Ohio President Walter J. Tuohy, “We believe -railroads are in the midst of a decade of unprecedented growth. But the cardinal need of railroad management today is the courage and imagination to live in the future. It has only been in the past few years that we have learned to stop following the past.”