Business & Finance: Air Brakes

A shining exception to the old rule that inventors never get rich was that most ingenious of all Yankee tinkerers, the late great George Westinghouse. He founded scores of concerns to exploit his contraptions. At one time he was worth at least $50,000,000. Heads of the Westinghouse corporate family have always been Westinghouse Electric & Manufacturing, which passed from the founder’s control in the panic of 1907, and Westinghouse Air Brake, which was the first but is no longer the foremost. Today Air Brake’s assets of $55,000,000 are topped by Electric’s $181,000,000.

In the peak railroad year of 1926 Westinghouse Air Brake made $10,000,000. A Mellon (Richard K.) sits on the board but even the Mellons could not prevent the company from losing $600,000 last year. So far this year railroads have ordered about 13 times as many freight cars as they built or bought all last year, and Westinghouse is once more in the black. Last week it looked as if Westinghouse would stay in the black for at least a decade. The American Railway Association, as one of its last acts before it was formally absorbed by the bigger & better Association of American Railroads, announced that 80% of its members had voted to equip their old freight rolling stock with new Westinghouse brakes already required by the Association on new equipment. Binding on all members, the vote called for completion of the changeover within ten years. Westinghouse not only invented the air brake, but, before he was through, nearly perfected it. All improvements since have been merely refinements of that amazing gadget, the air brake triple valve. And most of the improvements have been in one direction—to make the brakes on the last car of a train work as soon as those on the first. On passenger trains, the brake action is practically simultaneous on every car. But on a long freight it takes an appreciable time for the air pressure to equalize. A delay of as little as nine seconds may cause “buckling”—cars popping off the tracks. More serious in the long run is the wear & tear caused by cars crashing against each other. But in their desperate search for operating economies the railroads are running longer & longer trains. It is much cheaper to run one 150-car train than two of 75 cars, and to get the full benefits of Westinghouse’s new brakes every car in a train must be equipped. Thus theoretically, because cars are shuttled from road to road willy-nilly, every freight car in the U. S. must be equipped. All U. S. railroad brakes are Westinghouse but Westinghouse does not make all brakes. New York Air Brake, founded in Watertown, N. Y. about 50 years ago to turn out a vacuum brake, got involved in patent squabbles with George Westinghouse, and the upshot was an agreement whereby New York made Westinghouse brakes under license. Today the business is split approximately 25% to New York, 75% to Westinghouse. Westinghouse’s new type AB was put on the market three years ago. Only 30,000 cars are now equipped with it. But there are some 2,000,000 freight cars with old-type brakes. Thus at first blush it looked as if the two air brake companies could count 200,000 brake orders per year at $145 a set—$290,000,000 of business in the next ten years. Westinghouse stock jumped from $18 per share to $23 on the American Railway Association’s announcement last week, New York from $13 per share to $18. Both stocks would have soared astronomically if the outlook had been as sweet as it first appeared. Most railroads have no cash to spare for such improvements, even though they will save money in the end. Prospects of PWA brake loans are bleak.*

*A steel box car costs $2,000 new.