PENN CENTRAL: THE ROAD TO NATIONALIZATION

The Penn Central is slowly-but surely inexorably drifting toward nationalization. Under railroad bankruptcy proceedings, the railroad is supposed to be kept running and reorganized into a profit making company. However, a change in management has not brought the improvement many expected. Penn Central's real undoing has been the geography and history of the Northeast. Heavy industry isn't growing rapidly, travel distances are short, and freight yard costs are high. Total freight traffic is not what it was in 1955. And the problems won't go away no matter who owns Penn Central. Anti-pollution laws have caused utilities to shift to cleaner coal, resulting in an annual revenue loss of about $75 million for Penn Central. At the present, erosion of the estate continues, and without government action, the time beyond which Penn Central cannot allow adoption of the master plan, and get the railroad at hand. The trustees maximum requirements for making the railroad profitable include: (1) a one-time gift of $600 to $800 million to modernize, (2) the elimination of one man from every freight train crew, by attrition, (3) abandonment of service on 5,000 miles of lightly used track, and (4) additional underwriting by governments and Amtrak of losses on commuter and inter-city passenger trains. Congress is not eager to go the Amtrak route with Penn Central, but Judge Fullam in effect delivered an ultimatum: Either Congress make some very drastic - and unpopular - changes that will allow the railroad to become a profitable private company or he may simply shut it down October 1. As much as Congress would like to ignore Fullam, it can't. The Penn Central is virtually indispensible. The rail unions have never been known as weaklings on Capitol Hill, and if the government comes in, there may be a way of preserving the 5,700 jobs from crew reduction and of minimizing abandonments. The states and localities want real estate tax payments resumed, and want abandonment minimized. Shippers along the 5,000 miles of track to be abandoned claim there will be cases of genuine hardship. The bondholders' interest is relatively simple: Let the government pump in some money to resume real estate taxes, the conflicting interests, virtually anything the back on its feet as quickly as possible. Given the conflicting interests, virtually anything the government does about Penn Central will offend powerful forces. Congress may take the least unpopular-and most expensive-way out (nationalization in some form).

  • Corporate Authors:

    Washington Post Company

    1150 15th Street NW
    Washington, DC  USA  20003
  • Authors:
    • Samuelson
  • Publication Date: 1973-3-11

Media Info

Subject/Index Terms

Filing Info

  • Accession Number: 00043521
  • Record Type: Publication
  • Source Agency: Washington Post Company
  • Report/Paper Numbers: Newspaper
  • Files: TRIS
  • Created Date: May 23 1974 12:00AM