"All Aboard!"

(See front cover)

In the dark winter of 1932 "Uncle Dan" Willard of the Baltimore & Ohio and eight other railroad presidents met 21 representatives of railroad labor in the Palmer House at Chicago. The U. S. railroads, said "Uncle Dan" in effect, were just about broke. Maintenance and fixed charges had been cut to the bone. Would the 1.000,000 U. S. railway employes take at 10% temporary deduction in pay to save the roads from ruin? The workers' representatives said yes. Two years later in Washington Capital and Labor again got together, agreed on a staggered plan to restore the deduction, thus unsensationally closing an achievement in national collective bargaining almost Utopian.

Back to Chicago, fortnight ago, went railroad labor in the persons of 450 delegates of the five big railroad Brotherhoods (engineers, firemen, conductors, trainmen, switchmen). After nine days of deliberation, they determined to ask railroad managements for a 20% blanket wage raise. No one expects that they will get it; the 20% figure is for bargaining purposes. But they will undoubtedly get 2 1/2% to 5%, for several good reasons.

One is that the railroad-business is an old business. Railroad employes and employers are used to bargaining with each other. They understand and like each other. And since 1926, the year the Railway Labor Act was passed, it has been compulsory, if one side fails to answer the other on wage and work proposals within 30 days, to resort to the National Mediation Board.

Another reason that some reasonable wage adjustment will come from the Brotherhoods' demand is that railroad workers are not exhausted youngsters from the nerve-shattering assembly lines of modern manufacture, but seasoned men whose average term of service is about 15 years.

But the best reason for assuming that the roads will give their employes a raise is that, after five terrible years, the U. S. railways are beginning to make a little money.

The nation's second industry,* which still hires more men than Steel and Automobiles together and pays nearly $1,000,000 a day in taxes, has come back--and come back from way back. There never was such a depression in railroad history as the last one. A typical victim was the thoroughly sound Illinois Central. I. C.'s President Lawrence Aloysius Downs once revealed that after the panic of 1907, his road's revenues declined 4%. The drop from peak to valley was only 8% in the depression of the 1890's, only 20% in 1870's, only 24% after the crash of 1857. From 1929 through 1933 Illinois Central's loss in annual revenues was more than 50%, approximately the figure for U. S. railroads as a whole.

Instead of having more than $6,000,000,000 with which to run the U. S. rail system, railroad managements in the lean years had about $3,000.000,000. In 1932 not one steam-locomotive was bought, in 1933 just six passenger cars. Dividends virtually disappeared. Nearly 25% of all railroad bonds went into default. Seventy thousand miles of line, nearly one-third of the total, went into the hands of the courts and 600,000 railroad workers lost their jobs. The biggest single customer of heavy industry disappeared from the market and the Government had to pass out more than $700,000,000 in loans to keep the wreckage afloat.

Rebirth. When Business is bad, railroad business is worse. When Business improves, so does railroad business. The U. S. railroad business began to roll out of its rusty industrial siding two years ago. By the beginning of last year it had clacked on to the main line and was chuffing up the hump of recovery. Last week, as 1936 came to an accounting close, dispatches of good news were coming in from all over the nation's rail system and the roar and smoke of recovery filled the air.

Consolidated net income figures of the 140 Class I carriers showed that, whereas in 1932-34 the roads as a whole failed to earn fixed charges and in 1935 only broke even, in 1936 they showed a profit of $155,000,000. Not all lines shared this good fortune. Missouri Pacific will probably be $8,000,000 in the red; Rock Island was $13,000,000. But Norfolk & Western made $33,000,000 in 1936 as against $25,000,000 year before, Chesapeake & Ohio $43.000,000 as against $31,000,000, Pennsylvania $38,000,000 as against $23,000,000, Nickel Plate $7,000.000 as against $1,000,000. A particularly good sign was that the pace of improvement quickened toward the year's end, Southern Pacific, for example, enjoying the best December in its history. An even better sign for U. S. railroads as a whole was that while the total gross revenue for December was more than 20% below 1929, net income was at 1929 level. The roads had learned to make more profit out of less business.

Last week the roads were not just counting their money, they were spending it on much needed improvements in equipment and right of way. Union Pacific cracked out an order for 25 new locomotives. New York Central, headed for receivership in the depth of Depression, was about to cut its interest charges by refunding old bonds. And Pennsylvania announced that it would start immediately on electrification of 85 mi. of four-track main line west to Harrisburg, Pa. Various yard, branch and freight lines will be electrified at the same time, bringing the cost of the whole project to about $158,000,000 and completing the program launched in 1928 by the late William Wallace Atterbury.

Sweet as they are, earnings are not the only thing the roads have to show for their five years' ordeal. For, heading out of the Depression in 1937, the U. S. railroads find themselves today not so rich in materials as they were in 1929, but far richer in resource and morale. A ringside spectator at 17 years of railroad history is Joseph Bartlett Eastman, a member of the Interstate Commerce Commission since 1919, and the New Deal's erstwhile Coordinator of Transportation. Skeptical about private ownership as he is, nevertheless he told the Boston Chamber of Commerce last fortnight: "It is hard to be cold about the transportation situation today, because it is full of vitality and fascination and in a period of rapid growth and change which excites the keenest interest." For a time, the Commissioner continued, the railroads had shown serious symptoms of "incipient senility." But "the advantage which an industry has over an individual is that it can be born again. That'is what I think is happening to the railroads and I rejoice that it is so."

A.A,R. While the roads were learning how to make 50-c- do what $1 did before, they also learned that the days of their monopoly were over. Hard-headed and reactionary for the most part, the railroads were literally starved into teaching themselves the rudiments of modern merchandising. Some freight agents may still act as though business were a bore, some conductors may still regard passengers as trespassers, but by & large the roads are out to make friends as they never were before. Faster freight schedules, highly-publicized high-speed trains, 8,000 air-conditioned passenger cars, freight pick-up-&-delivery service are all exciting evidences of the railroads' rebirth. Most spectacular bid for patronage was the 2-c- base passenger fare, inaugurated by southern and western roads where the traffic is light and forced on all roads last June by the Interstate Commerce Commission over the loud protests of the Pennsylvania, New York Central and New York, New Haven & Hartford. Last week New York Central reported that passenger revenue had climbed from $55,290,000 in 1935 to $62,500,000 in 1936, Pennsylvania that passenger business was up from $60,000,000 to $67,500,000. But neither was prepared to admit that the low fare increased their income, noting that prior to June, traffic was already on the rise.

This great show of vitality in an industry which got its hardest knock when it was a century old is nowhere better epitomized than in the brand new united front the roads got together and set up in 1934--the Association of American Railroads which was evolved from the old American Railway Association and the Association of Railway Executives, and which is currently spending a million dollars to plaster the nation with such new railway slogans as: ALL ABOARD! WE'RE GOING PLACES! And in choosing a man to head A.A.R. and "speak and act for the entire industry in matters of common concern," the Association's 150 member roads, picked John Jeremiah Pelley, a man who is not only ready and able to go places but in his 58 years has already been places.

The first place that John Jeremiah Pelley got to was Anna, Ill., where his father, an Irish immigrant, had settled as a contractor after a stretch in the Confederate Army. Son John hustled baggage in Anna's Illinois Central depot during summer vacations, taught school when he was 18, spent a few months at the University of Illinois in 1899. The summers in the Anna depot destined John Pelley for railroading. Only twice has he remained in one railroad job as long as five years--once as an I. C. superintendent in Fulton, Ky., and once as president of New York, New Haven & Hartford, which he went to from the presidency of Central of Georgia.

On the New Haven not only did John Pelley become one of the most popular figures in U. S. railroading, but he blossomed out as an industrial statesman as well. It was in the summer of 1932 that a New Dealer rang his telephone in New Haven, told him that Candidate Franklin Roosevelt was going to define his position on the railroads a few days hence in Salt Lake City. Mr. Pelley had recently issued a statement about government regulation with which Mr. Roosevelt had found himself in complete accord. Might Mr. Roosevelt quote it in part? John Pelley, a lifelong Republican, amiably consented. "And," he later recalled, "I came damned near voting for him, too."

Whether or not he voted for the President, he had a host of good Democratic friends in House and Senate. Moreover, he had had operating experience in the

South, West and East, the big divisions of U. S. railroading. He was therefore far and away the most logical man to go to Washington as A.A.R.'s president in 1934. It did not take him long to establish headquarters on 17th & H Streets. It is full of cheap, golden oak desks and big wall calendars and the unmistakable fumigant which characterizes railroad offices from the Bangor & Aroostook to the Alaska Railroad. President Pelley's own quarters are decorated with an illuminated testimonial from New Haven employes which he prizes highly. "You can always fool the guys above you," he says, "but you can't fool the guys below you."

Most of President Pelley's 400 employes-half in Washington, half out-are busy keeping tabs on the country's 1,800,000 freight cars. One of their chores is to gather vital statistics of car loadings. The most notable industrial achievement of President Pelley's two years has been the so-called "average" plan for settling car hire between railroads and reducing profitless hauling and switching of empty cars. The A.A.R.'s car service division referees this activity, which now saves U. S. roads $12,000,000 a year.

John Pelley's two biggest functions, however, are fronting for the roads before Congress and Labor. In the first capacity he is ably assisted by Robert Virgil Fletcher, a courtly onetime Mississippi judge whose dignity and patience have made him popular with Congressional committees. Now 67, sharp of wit, lucid in explanation, Lawyer-Lobbyist Fletcher heads A.A.R.'s legal department, likes to make speeches like the one he gave last week in St. Paul against government regulation and government ownership. Currently A.A.R. is lobbying, with the support of Labor, for the repeal of the "long-&-short haul" clause of the Interstate Commerce Act. This clause makes it illegal to charge less for, say, a haul over the same route between Chicago and Pittsburgh (471 mi.) than between Chicago and Cleveland (340 mi.) In competition with trucks and steamships which are not thus restricted, this is a serious handicap to the railroads. Counter-lobbying goes on against such pet Labor proposals as the six-hour day, a half-mile limit on train lengths and the "full-crew" plan for adding an extra man to every train.

John Pelley, the A.A.R. and most railroad men are nowadays receiving their worst Labor headache from the pension problem. The first railroad pension plan was knocked out by the Supreme Court. Promptly passed was another one which has not yet reached the Supreme Court but was held unconstitutional by a lower court. Meantime the railroads and the Railway Labor Executives Association have been trying to get together on a mutually acceptable agreement to obviate the necessity of further legislation. They are split on a number of details, chiefly on whether the retirement age is to be 65 or 70, a vital point since thousands of railroad men are close to retirement age right now.

Another attempt to settle the pension problem was made last week over a conference table in an office next to President Pelley's. On one side of the table sat Management in the person of Mr. Pelley, backstopped by such railroad notables as Erie's Charles Eugene Denney, Pennsylvania's Martin Withington Clement, Illinois Central's Downs, Union Pacific's Carl Raymond Gray, Santa Fe's Samuel Thomas Bledsoe, St. Paul's Henry Alexander Scandrett. On the other side of the table sat able, popular Chairman George M. Harrison of the Railway Labor Executives Association supported by such labor leaders as Vice President G. E. Joselyn of the Order of Railway Telegraphers, President James A. Phillips of the Order of Railway Conductors and Captain James J. Delaney of the Masters, Mates & Pilots of America. It did not disturb easy-going Laborite Harrison that when the week ended he had little to show for the meeting except a date for another (Feb. 8). Said he with a chuckle: "We never used to get anything-but now, with a sympathetic Congress. . . ." To that John Pelley's reply is to cast an eye toward the White House and observe with a smile of his own: "The boys have been pretty good to us."

How good the boys or the gods would continue to be to U. S. railroading, stocky, optimistic John Pelley cannot say. Ahead of him is not only the pension snarl and the demand for wage increases, but also a battle for a revision of freight rates to give his carriers more revenue. But John Pelley is no worrier. Said he in the worst of hard times: "Get me right. I'm not going to talk bullish. Nothing like that. I can't see myself sitting on a pink cloud right now. But people are overdoing this pessimism." Today, with the pink cloud at least in sight. John Pelley, like a spry trainman who runs ahead to see that all is clear, is giving the pink cloud the highball.

* First: Agriculture.

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