Eastern R. R. Consolidation

Daniel Willard for the Baltimore & Ohio and the Van Sweringens for the Chesapeake & Ohio last week made another feint towards accomplishing consolidations of eastern railroads. In 1920 Congress authorized the railroads to consolidate into trunk systems. But there was no acceptable plan. So the railroads have bought to form system themselves. Between the Mississippi, Great Lakes and Atlantic Seaboard, the Pennsylvania, New York Central and B. & O. were solidly braced to take on smaller lines. The Van Sweringens entered the situation by buying control of the Nickel Plate, Chesapeake & Ohio, Erie, Pere Marquette and Hocking Valley and offering a plan (contested in the event) for unifying them. Leonor Fresnel Loree entered it by control of the Delaware & Hudson and the Wabash, by buying near control of the Lehigh Valley and by getting an option (lapsed in the event) on the Buffalo, Rochester & Pittsburgh.

Thus there grew to be five factors in the eastern railroad situation. Rules require that they or any other group take weak railroads into their systems that compete in their business, that they avoid injuring each other's business, above all that they serve the public equitably. The Interstate Commerce Commission is their moderator, referee, judge.

Such stipulations put great railroad executives to tussling like small boys. The eastern railroad situation became a melee where each one of the big participants tried to do at least three things at once--grab as many prosperous small railroads as possible, shove his opponent away from good roads towards poor ones, avoid kicking the I. C. C. (i.e., the public's interests). The railroads soon recognized that such promiscuous buffeting was unprofitable. For one thing, the turmoil made their customers aware that not yet were all great corporations "good corporations," like Judge Gary's U. S. Steel Corp. So the railroad executives withdrew to secret confabulations and pacts.

It soon became evident that the Pennsylvania and Loree interests had joined for a run-run-pull-away match against the New York Central, B. & O. and Van Sweringen interests. At the year's end the situation was this:

Mr. Loree had nominally dropped out of the eastern contest. He still controlled his Delaware & Hudson. But he had sold his (i. e., D. & H.'s) control of the Wabash and his near control of the Lehigh Valley to the Pennsylvania. He had forfeited his option on the B., R. & P.

The Pennsylvania (William Wallace Atterbury, president) had the biggest, best-integrated, and most strategically located system of the district. It had control of the Wabash and almost half the stock of the Lehigh Valley. Most significantly it was in process of establishing itself in the public mind as the eastern railroad. This it was doing by institutional advertising and by pushing new railroad features, as electrification, air-rail transportation.

New York Central (Patrick Edward Crowley, president) had done those promotional things, also. Only last week did there come intimation (not announcement) that the New York Central would electrify its lines all the way from Manhattan to Buffalo. In railroad alignment the road had stood fairly unmoved. Its major action was to take one-third the stock of the Wheeling & Lake Erie from the Van Sweringens, who bought the road from the Rockefellers. They retained one-third interest, gave the B. & O. the last third.*

Baltimore & Ohio (Daniel Willard, president) owned one-third of the Wheeling and all the Western Maryland. Significantly it had succeeded, almost as well as the Pennsylvania, in gaining favorable public attention--this through inspired newspaper articles, by painting its engines and trains brightly, by using "biggest" engines, by its great centennial exposition.

Van Sweringens had switched around their lineup. Instead of the Nickel Plate, they made their Chesapeake & Ohio the name road, and had asked the I. C. C. to approve the C. & 0. owning the Hocking Valley, Pere Marquette and Nickel Plate. They bided their time about drawing their Erie into the system (I. C. C. is still cogitating this matter). Besides, the Van Sweringens had worked the Wheeling deal; owned one-third of its stock. And they had suddenly bought the Buffalo, Rochester & Pittsburgh, whose option Mr. Loree had lost.

Such was the eastern railroad situation at the beginning of this year. Mr. Loree out, Mr. Atterbury metaphorically on his wary toes, Mr. Crowley breathing heavily to one side, Mr. Willard and the Messrs. Van Sweringen sparring. The C. & 0. and B. & O. protagonists were obviously irked with the Pennsylvania general because he had not shared his Wabash and Lehigh Valley stock with them, as they had shared Wheeling with the New York Central chief.

Last week Mr. Willard and the Messrs. Van Sweringen feinted. They let it be known that very shortly they would ask the I. C. C to permit them to "acquire" not to consolidate, certain other railroads. The C. & O. would ask to "take over" the Nickel Plate; Pere Marquette; Hocking Valley; Erie; Virginian; Delaware, Lackawanna & Western; Bessemer & Lake Erie; Pittsburgh & Shawmut; Pittsburgh, Shawmut & Northern; and other short lines. The B. & O. would ask to "take over" Wabash (from the Pennsylvania); Ann Arbor; Detroit, Toledo & Ironton (Henry Ford's well-renovated road); Western Maryland; Reading; Central of New Jersey; Chicago, Indianapolis & Louisville (the Monon); Buffalo & Susquehanna.

If the I. C. C. were to allow any such acquisitions (and later consolidations; the eastern railroad situation would become as follows:

Northern Mississippi and Great Lakes cities would have four integrated routes to the Atlantic for their farm and industrial products. Baltimore would grow greater as a port, reached by the C. & 0., B. & 0., and Pennsylvania. This is important in view of the growing commerce with South America. New York City might also be relieved of some of her traffic congestion, to the benefit of shippers, if to the chagrin of trans-shippers. Neighboring cities might benefit, places like Port Newark, N. J., and Norfolk, Va. All four railroad systems would carry grain and manufactured articles eastward. The Pennsylvania, C. & O. and B. & O. would go through soft coal country (western Pennsylvania, Ohio, West Virginia), the New York Central and Pennsylvania through hard coal country (eastern Pennsylvania). Pennsylvania and B. & O. would serve the middle Atlantic states. New York Central would take care of New England over the Boston & Albany and New York, New Haven & Hartford, and would reach eastern Canada over the Rutland. The Pennsylvania might also branch up to Canada, and bridge over to New England, by way of Mr. Loree's friendly, temporarily isolated Delaware & Hudson,* and go into New England over the N. Y., N. H. & H. New York Central, C. & O. and B. & 0. would han le Michigan's automobiles, furniture and lumber; the B. & O., C. & 0. and the Pennsylvania the South's lumber and fruits northward bound and South America's raw materials U. S. bound. All four roads would touch Chicago, St. Louis and New York; and all but the New York Central, Baltimore. ^

*The Taplin brothers of Cleveland want the Wheeling, as they do the Western Maryland, to hook up with their short Pittsburgh & West Virginia and form a private Lakes-to-Ocean coal road. So they demanded that the I. C. C. forbid the B. & O., N. Y. Central and Van Sweringens to own the Wheeling. The I. C. C. last week continued to cogitate.

*Not to be confused with Mr. Loree's Delaware & Hudson; nor with the trifling, run-down

*Delaware & Northern which reached the news last week when Samuel E. Rosoff, Manhattan subway builder, bought it on speculation. New York City will probably need part of its right of way for a new water supply system.

*Lehigh Valley's destiny is indeterminate, even though the Pennsylvania owns practically half its stock.