Merger Plan Hatched

The Interstate Commerce Commission last week chose a new chairman for 1930 and simultaneously gave him more work to do than he or anyone else could possibly accomplish in a year's time. By a process of rotation Frank McManamy, whose I. C. C. service began 23 years ago as a clerk, was advanced to the head of the Commission to succeed Ernest Irving Lewis. Chairman McManamy will need all his knowledge-and experience as a practical railroad man to cope with the task assigned him, because last week the Commission adopted and published its long-delayed plan for consolidating U. S. railroads. Eight years in the making, the I. C. C. plan is likely to take at least as long to execute.

Were not the I. C. C. a serious-minded body its Plan might have been entitled: "How to divide 250,000 miles of railroad into 19 systems and juggle them all into the air at once." The Commission had drawn up a set of instructions for this breathtaking feat, but left for another time any attempt to get its 19 systems off paper and into operation.

The Plan. The Transportation Act of 1920 which returned U. S. railroads from the Government to their owners ordered the Commission to prepare a nation-wide plan for consolidation. The carriers were then weak and shaky after Federal operation. It was argued that consolidation would link the strong with the weak, eliminate wasteful competition, put all roads on a profitable basis. Professor William Zebina Ripley of Harvard produced for the Commission a merger plan in 1921 which caused such dissension that it was quickly junked. Vainly the Commission wrestled with the Congressional order, made no apparent progress. Impatient at the delay, some roads (Nickel Plate, Baltimore & Ohio, Northern Pacific) brought in voluntary merger plans only to have the Commission reject or ignore them. The Commission begged Congress to relieve it of the duty of framing a general plan. Congress did nothing. Finally, this year, the Commission buckled down to work, produced a plan which mustered a majority vote.

The general plan calls for 19 U. S. systems and two supplementary systems composed of Canadian lines entering the country. It implies a managerial unification of systems as well as financial consolidation. The Commission's prime principle was to maintain competition between systems rather than between individual roads. In each system were grouped many a short line, controlled tributary and leased feeder.

The 19 systems and the chief carriers grouped in each:

Boston & Maine--Delaware & Hudson, Bangor & Aroostook. Maine Central.

New Haven--New York, Ontario & Western, two important "bridge" short lines.

New York Central--substantially as is with the addition of Virginian.

Pennsylvania--substantially as is.

Baltimore & Ohio--Reading, Central of New Jersey, Chicago & Alton, Buffalo, Rochester & Pittsburgh, Detroit, Toledo & Ironton (one-half).

Chesapeake & Ohio--Nickel Plate, Hocking Valley. Pere Marquette, Erie. Delaware, Lackawanna & Western, Bessemer & Lake Erie.

Wabash--Lehigh Valley, Wheeling & Lake Erie, Pittsburgh & West Virginia, Western Maryland. Ann Arbor, Norfolk & Western. Seaboard Air Line, Detroit, Toledo & Ironton.

Atlantic Coast Line--Louisville & Nashville, Nashville. Chattanooga & St. Louis, Clinchfield, Atlanta, Birmingham & Coast.

Southern--Florida East Coast, Norfolk Southern, Georgia & Florida.

Illinois Central--Central of Georgia, Minneapolis & St. Louis, St. Louis Southwestern.

Chicago & Northwestern--Mobile & Ohio, Chicago, St. Paul, Minneapolis & Omaha.

Northern Pacific--Great Northern, Spokane, Portland & Seattle.

Chicago, Milwaukee, St. Paul & Pacific--Duluth & Iron Range, Copper Range.

Chicago, Burlington & Quincy--Colorado & Southern. Missouri-Kansas-Texas.

Union Pacific--Los Angeles & Salt Lake, Oregon Short Line, Kansas City Southern.

Southern Pacific--Many a new short line.

Atchison, Topeka & Santa Fe--Kansas City, Mexico & Orient, Chicago Great Western.

Missouri Pacific--International-Great Northern, Western Pacific. Denver & Rio Grande, Texas & Pacific.

Chicago, Rock Island & Pacific--St.

Louis-San Francisco, Fort Worth & Rio Grande.

Supplementary Canadian systems entering the U. S.:

Canadian National--Central Vermont, Grand Trunk.

Canadian Pacific--Minneapolis, St. Paul & Sault St. Marie ("Soo"), Duluth, South Shore & Atlantic.

Surprises. The biggest novelty in the Commission's plan was the creation of a fifth system in the Eastern territory--the Wabash. The four great Eastern roads (New York Central, Pennsylvania, B. & O., Nickel Plate) had vainly dickered among themselves to exclude another line from their area. The Wabash system was formed by a combination of miscellaneous lines including many the B. & O. and Nickel Plate had sought to absorb. The inclusion of the wobbly Seaboard in the Wabash gave that system a line from Kansas City to Miami.

Another surprise: Creation of a separate system around the Burlington instead of linking it up with its owners, Great Northern and Northern Pacific.

Extensions. To many roads the Commission's plan gave many new things. Examples: The B. & O. would reach New York over its own lines (Reading and Central of New Jersey), would link its Chicago and St. Louis terminal., and touch Kansas City by the Chicago & Alton. The Illinois Central would spread west and southwest via the Minneapolis & St. Louis and the St. Louis Southwestern. The Atlantic Coast line would enter New Orleans via the L. & N. while the Southern would penetrate Florida on the Florida East

Coast. The Chicago & Northwestern would dip south on the Mobile & Ohio, while the Santa Fe would expand into Mexico by the Orient and into the Northwest by the Chicago Great Western.

Significance. Heretofore the I. C. C., by rejecting merger proposals, has been telling carriers how they might not consolidate. Its own plan serves to show roads how they now may. The Commission has no power to compel roads to merge in accordance with its plan, which it frankly states is subject to "modification." Since rail consolidations became a public policy in 1920, grave doubts have arisen as to their present necessity. Carriers have improved financially by leaps and bounds, with few weak roads needing the aid of strong ones. The agitation in Congress for additional consolidation legislation is designed to give the roads a sort of power of condemnation whereby they can acquire lines necessary to round out their systems and win the I. C. C.'s approval. The prospect for this legislation at present is poor.

Reactions. Western senators raised a great hue and cry against the proposed marriage of the Great Northern and Northern Pacific, claiming it would eliminate all competition. Chairman-elect McManamy concurred in the general plan "only because I expect economy and efficiency of operation to be promoted by the gigantic systems proposed. . . . We should not, to open the door to lawful consolidations, propose consolidations which are themselves unlawful and that I think we have done."

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