1957: Rail Transportation

1957: Rail Transportation

Archives consist of articles that originally appeared in Collier's Year Book (for events of 1997 and earlier) or as monthly updates in Encarta Yearbook (for events of 1998 and later). Because they were published shortly after events occurred, they reflect the information available at that time. Cross references refer to Archive articles of the same year.

1957: Rail Transportation

Traffic.

In recent years the railroad industry has failed to keep pace with the American economy. Despite the nation's great increase in production, the amount of railroad freight traffic was almost the same in 1956 as in 1947. This is especially significant because freight transportation provides about 85 per cent of the total railroad operating revenue. The rest comes from passenger transportation, 7 per cent; mail and express, 4 per cent; and miscellaneous, 4 per cent. Rail passenger traffic has a poorer record than freight, having declined every year since the end of World War II.

The tendency of the railroads to fall behind is evidenced by their diminishing proportion of the total intercity traffic. In 1956, according to preliminary figures, they carried only 48.2 per cent of the total amount (in ton-miles) of freight, express, and mail. This figure may be compared with the railroads' 49.4 per cent share in 1955, 65.2 per cent in 1947, and 75.2 in 1930. In passenger traffic the decline has been even more abrupt. From 8.0 per cent of the total number of intercity passenger-miles (including those in private automobiles) as recently as 1949, the railroads' share dropped to 4.3 per cent in 1955 and, by preliminary estimates, to 4.1 per cent in 1956.

Revenue and Rate of Return.

The trend of annual railroad revenue has been upward, for inflation has forced the railroads to raise their charges from time to time. The rate of increase in railroad revenue, however, has been slower than the rate of increase in the nation's total income. Thus, in 1947 the ratio of railroad revenue to national income was about 4.6 per cent; in 1955 it was only 3.2 per cent.

According to preliminary figures, the railroads' deficit from their passenger service in 1956 was about $697,000,000 — the largest in any year except 1953. Every large railroad lost money on its passenger service. In 1957 the ICC held hearings in its investigation of the passenger-deficit problem; at the end of the year it had not completed the investigation.

As railroad expenses in 1956 and the early months of 1957 increased more than revenues, the industry's rate of return (revenue minus expenses and taxes, as a percentage of investment) fell from 4.22 per cent in 1955 to 3.95 per cent in 1956; the trend in 1957 was sharply downward. The railroad industry in general believes that its rate of return should not be below 6 per cent.

Means of Recovery.

The railroads' poor record in recent years is largely a consequence of the naturally rapid development of newer modes of transportation, especially transportation by motor vehicle. Railroad interests assert, in addition, that their difficulties have been made unnecessarily severe by governmental policies, under which other forms of transportation enjoy government aid (subsidies). The railroads, however, are subjected to unduly restrictive regulations, especially regarding their rates and their freedom to abandon unprofitable passenger service.

To prevent the loss of additional traffic to other modes of transportation and to win back traffic already lost, the railroads pursue a variety of courses. They oppose the granting of subsidies to their competitors in the field of transportation, they urge removal of regulations which discriminate against them to their competitors' advantage, and some of them propose a government agency to lease equipment to the railroads (Symes Plan). They seek permission to reduce the rates on some of the competitive traffic. In addition, there are proposals, some of them extensions of programs already under way, intended to improve the quality and reduce the cost of railway freight service, including an expansion of the 'piggyback' system, increased automation, and the possible merging of the railroad systems. Finally, in the field of passenger service, they seek to discontinue certain unprofitable services and improve those which would be retained.

Subsidies.

Railroads have long opposed, in vain, the policy of the Federal government, continued in 1957, under which barge lines make no payments in return for the large expenditures by which the government maintains and improves the inland waterways. The fact that those costs are borne by the taxpaying public rather than by the barge lines enables these carriers to compete more advantageously with the railroads. A somewhat similar problem is presented by the Canadian-U.S. St. Lawrence Seaway project, which will permit large ocean vessels to operate in 1959 and thereafter between the Atlantic Ocean and Lake Erie. Much import and export traffic now moving by rail between the interior and such Atlantic ports as Boston, New York, and Philadelphia, will be carried directly by ocean vessels between foreign and Great Lakes ports.

Unlike other river waterways, the improved St. Lawrence will be operated on a toll basis. In 1957 spokesmen for the Great Lakes interests urged that the tolls be set at levels that will not meet the full costs of the Seaway, because of the promotional effect that such low tolls would have on Seaway traffic. Eastern railroads, on the contrary, maintained that the Seaway should be self-liquidating and that the tolls should therefore cover the Seaway's full costs. Although Eastern railroads view the approaching competition of the Seaway with trepidation, some of them anticipate partially compensating benefits through the enhanced industrial activity of the Great Lakes region and the rail traffic that it will stimulate. Western railroads, in general, think that the Seaway will be advantageous to them.

Related to the Great Lakes-St. Lawrence improvements, and also feared by some railroads, is the project to increase the capacity of the Illinois Waterway, which connects Chicago on Lake Michigan with the Mississippi River. Completion of the first phase of this project is expected about 1962. No tolls are contemplated. Railroads may be able to compete successfully through rate reductions on competitive traffic.

Railroad interests have long maintained that the structure of taxes on highway users permits operators of heavy trucks to pay less than their proper share of highway costs, thereby giving truckers an unfair competitive advantage. Railroads have sought to arouse public and legislative opinion on this and related subjects. The public-relations efforts of some of the railroads in this connection received a setback in October 1957, when a Federal court held that they violated the antitrust laws.

Discriminatory Regulations.

Railroad spokesmen maintain that government regulation is discriminatory because it applies to virtually all rail transportation, while about 90 per cent of the inland-waterway transportation and 65 per cent of the truck transportation is unregulated. The exempt transportation includes, among other elements, the large amount of movement by trucks or barges operated by the owners of the goods transported. Such transportation, called private carriage, is also exempt from the transportation excise tax of 3 per cent on freight charges.

Railroads are often prevented by state regulatory agencies from discontinuing unprofitable passenger services, a handicap that has little parallel among highway and inland-waterway carriers. A relatively minor type of regulatory discrimination is the requirement of more detailed reports to the government than are required of other carriers. The railroads spend at least $7,000,000 each year in preparing statistics to be submitted to the Interstate Commerce Commission (ICC).

In planning a specific rate reduction to combat the diversion of traffic to another mode of transportation, a railroad often faces the question of whether or not the ICC will permit the reduction. The ICC, an agency of the Federal government, has authority to prevent interstate rates from becoming unreasonably low or unreasonably high. It has sometimes protected other modes of transportation by preventing railroads from fixing rates for competitive services at the relatively low levels that the railroads considered necessary.

A 1957 ICC decision indicates that this obstacle still exists. The case involved rates on petroleum products from a pipeline terminal in North Carolina to certain points in Virginia and West Virginia. The railroads wanted to charge rates 1' cents per 100 pounds below the trucking rates. The proposed rates would have been low enough to enable the railroads to obtain most of the traffic, and yet would have been high enough to cover all the costs of the rail service. The ICC, however, refused to let the railroad rates be set more than 1 cent below the trucking rates.

Thus, the railroads have been prevented in some cases from attracting as high a proportion of the traffic as rates reflecting their costs would have enabled them to attract. Accordingly, the railroads are seeking legislation that would forbid the ICC to consider the effect of a proposed rate on other modes of transportation or its relation to the rates charged by other modes.

Rate Increases.

To counterbalance rising costs, the railroads sometimes request the permission of the ICC to increase the general level of their rates. An ICC decision in August 1957, together with earlier interim decisions in the case, raised the over-all level of railroad freight rates about 10 per cent, bringing it to 108 per cent above the July 1946 level. The railroads had asked for a larger increase.

The railroads' contracts with some labor unions contain escalator clauses, under which wage increases totaling $125,000,000 a year went into effect on Nov. 1, 1957. A week later, the railroads announced that they would apply to the ICC for rate increases on many commodities. For competitive reasons, there were no general increases in rail passenger fares in 1954 and 1955; an increase of 5 per cent was granted in 1956 and another of 5 per cent became effective early in 1957. These increases, which brought the basic rail coach fare per mile to 2.7563 cents in the West, and 3.0318 in the South and Southwest, and 3.7212 in the Northeast, are not considered adequate to make the service generally profitable. Substantially higher rates, however, might greatly increase the diversion of passenger traffic to other modes of transportation.

Symes Plan.

In recent years, serious freight-car shortages have occurred during the fall period of peak demand. The railroads need to acquire additional cars at a much more rapid rate than in the recent past, but they lack the financial capacity to do so. To solve the problem, James M. Symes, president of the Pennsylvania Railroad, speaking in July 1957 on behalf of 34 Eastern railroads, proposed that a Federal agency be established with capital of $500 million and power to borrow $2 billion more, for the purpose of buying freight cars and other rolling stock. The agency would lease the equipment to railroads at rentals high enough to cover all costs. Some railroads have refused to endorse the plan, chiefly for fear that governmental supply of equipment will lead to additional government control and perhaps ultimately government ownership of railroads. A bill to carry out the Symes Plan has been introduced in Congress for consideration in 1958.

Piggyback.

The transportation of loaded highway trailers on railroad flat cars is intended to reconcile the low cost of longhaul rail transportation with the flexibility of local motor-vehicle movement by eliminating the costly and time-consuming transfer of goods between motor vehicles and railroad cars. Through this service, sometimes called piggyback, railroads hope to recapture some of the traffic lost to motor carriers. One railroad president is reported to have said that 96 per cent of his railroad's piggyback freight consists of traffic formerly moved by highway.

The future of piggyback rests largely on the level of the rates that can profitably be charged for the service; this level, in turn, depends on the cost of the service. According to a recent study by transportation engineer E. C. Poole (Railway Age, Aug. 26, 1957), piggyback tends to be less costly than all-highway transportation for distances of 100 miles or more; for distances of more than 500 miles it tends to cost less than half as much.

An outstanding new development in piggyback is the determination of the New York Central Railroad to enter this field, utilizing a novel technique. In Central's 'Flexi-Van' service, the wheel assembly is separated from a loaded highway trailer; the trailer, without wheels, is carried on a flat car. The process of freeing the trailer from its wheel assembly and placing it on the car, or the reverse at destination, ordinarily takes only four minutes. The railroad expects to initiate this service before the end of 1957.

Automation.

Through automation and other mechanization, the railroad industry in recent years has reduced the number of workers it employs (23 per cent fewer in 1956 than in 1946) and, in some cases, it has provided a faster service. Perhaps the outstanding event in this field in 1957 was the completion of the world's largest 'push-button' freight classification yard — the Pennsylvania Railroad's Conway Yard, located near Pittsburgh. In a classification yard, cars are sorted according to destination for attachment to the proper trains. With its radar, micro-talkie radios, and other equipment, the Conway Yard is able to classify 9,000 cars per day. The speed and capacity of this yard causes shipments in some cases to arrive at destination a full day earlier than they did under previous classification methods.

Mergers.

A far-reaching means of reducing costs is the merger of railroads, especially of those that compete with one another. In November 1957 two competing railroads, the nation's two largest in assets and in revenues, announced that they were considering a merger. If these railroads — the Pennsylvania and the New York Central — actually decide to merge, they will face the requirement of law that a railroad merger cannot take place without the ICC's approval.

Passenger Service.

To cope with the passenger-deficit problem, the railroads have followed a two-sided policy, that of decreasing certain services while improving others. In 1956 the railroads operated passenger trains on about 3,700 fewer miles than in 1955. Also in 1956 the railroads retired more than four passenger-train cars for every new one installed. The experience of the New York Central in the past few years was summarized in 1957 by one of its vice-presidents: 'When we spent substantial sums of money and vigorously promoted our [passenger] service, we increased our losses. When we contracted, we decreased our losses.'

In a few cases improvements initiated in 1957 involved the acquisition of new equipment. The Pennsylvania Railroad, for example, ordered 6 commuter coaches of the lightweight, electric Pioneer III type, first exhibited in 1956. On long runs, patronage of lightweight trains, in which some railroads had sought a solution of their passenger problem, was generally disappointing, partly because of vibration and other comfort considerations. New York Central's Xplorer and Rock Island's Jet Rocket were shifted to commuter or short-haul services. Experimental operations with General Motors' two Aerotrains proved of doubtful success; in November 1957 one was being remodeled and the other was soon to be leased to a Mexican railroad. The Baltimore & Ohio became the first railroad in the East to order 40-passenger, private-room, low-fare sleeping cars of the type introduced by the Burlington in 1956 as Slumbercoaches. The Baltimore & Ohio plans to call them Siesta coaches and to place them in operation in 1958 on its Washington-Chicago run.

Some railroads have sought recently to streamline their reservations and ticketing procedures. Especially notable in 1957 was the opening of an electronic system at the Pennsylvania Station in New York City. The making of a reservation and the issuance of a ticket by this system, which includes the world's largest closed-circuit TV installation, is said to require, on the average, only 2 minutes in contrast to 8 minutes previously required.