Freight Forwarding

When the Interstate Commerce Commission wants to learn something about railroading, it simply asks the railroads and they have to tell. Last week the I. C. C. invited a procession of eastern railroad men to hearings at Manhattan's Hotel Pennsylvania to tell all they knew about a recondite railroad subject-freight forwarding companies. In the course of its questioning the I. C. C. not only learned a great deal about freight forwarding but uncovered a number of facts which sent newshawks scurrying to proclaim a trunk line FREIGHT WAR.

In this instance the screws were being put on old Daniel Willard's Baltimore & Ohio by Frederick Williamson's New York Central. The screwdriver was Universal Carloading & Distributing Co., biggest operating subsidiary of the biggest freight forwarding company in the land, U. S. Freight Co. Universal's business consists of collecting small freight shipments at strategically located terminals, consolidating the assorted packages into carload lots, dispatching the loaded cars to another Universal terminal, where the carload is unscrambled, the goods delivered to their respective consignees.

For profit a forwarding company looks solely to the spread between the lower freight rate on full car shipments and the higher rate on less-than-carload lots ("l.c.l."). In practice the forwarding companies charge something less than the going l.c.l. rates, which makes their service more attractive to shippers than ordinary railroad service. Last year U. S. Freight took in about $40,000,000 from shippers, paid out in actual transportation charges about $32,000,000, most of which went to the railroads. Handling the innumerable small pieces of freight cost another $7,000,000, and when the U. S. Freight accounts were finally cast up the final profit was only $757,000.

Since forwarding companies, not the shippers, route the freight, the railroads have a natural interest in forwarding affairs. Among the I. C. C. revelations last week was the method by which New York Central controls U. S. Freight and its big subsidiary, Universal-through a tortuous labyrinth of holding companies and dummy corporations. National Carloading Corp., No. 2 freight forwarder of the U. S., is tied up with the Van Sweringen interests.

The power to route freight plays a significant part in U. S. business. Inserted in the I. C. C. record last week was a memorandum written to a New York Central official complaining that Sears, Roebuck & Co. was switching freight forwarding patronage from New York Central's Universal to the Van Sweringen-controlled National Carloading Corp. Reason: Central bought no Sears, Roebuck paint.

In the hands of a railroad a freight forwarding company is not only a means of getting business for itself but also an effective weapon to use on competitors. Through, its routing power, a freight forwarder may divert its carload shipments from one road to another. That, the I. C. C. discovered last week, was precisely what Universal was currently doing. The business it used to give to Baltimore & Ohio was being diverted as rapidly as possible to Pennsylvania R. R.

Suggestions that the inspiration for this move might have originated with New York Central were vastly annoying to U. S. Freight's President Frederic N. Melius, who rumbled: "Universal Carloading ... is simply a shipper of merchandise freight. It changes its routings on freight from one road to another to suit its own conditions and conveniences. No railroad has anything to do with determining such changes."

Technically Mr. Melius was correct but the circumstantial evidence was against him. The I. C. C. had the word of a Baltimore & Ohio man that a New York Central vice president had telephoned him to threaten that Universal would surely shift its patronage if B. & O. made an alliance with the Keeshin truck lines. The B. & O. continued to discuss that alliance, whereupon Universal started to route over Pennsylvania.

While Pennsylvania is the traditional Central rival, the two roads stood shoulder to shoulder on the question of the 2-c--per-mile passenger fare, regarding B. & O.'s support of the rate reduction as nothing less than traitorous. New York Central's objection to B. & O.'s hookup with Keeshin was founded on sound competitive sentiments. It can provide B. & 0. with what amounts to an established store-door pickup-delivery system, a service New York Central is not ready to offer. Furthermore New York Central has a heavy stake in a service which provides shippers with big steel boxes that can be loaded on flat cars. B. & O. could go that one better by running a Keeshin trailer on flat cars, running it off at its destination to be attached to a Keeshin truck tractor.

An optimist by profession if not conviction, B. & O.'s Daniel Willard viewed the pressure from New York Central as definitely "constructive," observing last week: "Where competition ceased, civilization ceased."

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