Galahad on Wheels

(See Cover)

It was a dull week on the New York Stock Exchange--except for one stock. New York Central Railroad, usually as quiet as a tombstone, was the liveliest stock on the Big Board. The shares were steadily rising. How come? It was no secret that the great New York Central, second biggest U.S. railroad, was losing money hand over fist. And earning prospects this year looked anything but bright.

Every Wall Streeter thought he knew the answer. The answer was personal; a shrewd, scrappy little man named Robert Ralph Young, board chairman of the Alleghany Corp. In the short space of a few years, Bob Young had become the most-talked-about railroadman in the U.S. Consequently, people took stock--quite literally--in what he intended to do. He had already put together a railroad kingdom out of the roads which Alleghany Corp. controlled: the Chesapeake & Ohio, the Nickel Plate, the Pere Marquette and its stock interests (in ten other roads). Now he was after an empire. The New York Central would be its keystone.

Few people knew about Young's campaign to get control of the Central until it was well under way. A few months ago he had started buying up Central stock through a broker. A fortnight ago the news came out that Bob Young had spent $2,500,000 for 162,500 shares. Against the number of shares outstanding, some 6,447,412, this seemed a piddling amount.

But, like a general who knows that a small hill can become the key to a whole battlefield, Bob Young went right on buying. By last week, he had taken his hill, and said so. He announced that he had bought another 147,000 shares for about $2,690,000. Now, said Bob Young: "I hold enough stock to control the New York Central."

But did he? No one knew for sure. All he had was some 5% of the stock. (Alleghany controls C. & O. with only 6%.) Was that really enough to control Central's 10,743 miles of tracks, its 119,208 employes, its 139,278 locomotives and cars? Well, if the Central wanted to prove that it wasn't, everyone was sure that there would be the roughest, toughest, brass-knuckledest fight since the throat-cutting days of Robber Barons Fisk, Gould and old Commodore Vanderbilt.

Help from Aunt Janes. Among the Central's widely held stock, Young's Alleghany block was bigger than anyone else's (even Central's Board Chairman Harold S. Vanderbilt, great-grandson of the Commodore, held only about 60,000 shares). And Bob Young was a specialist in rallying small stockholders behind him ("Aunt Janes," he calls them). To the Aunt Janes--and the Uncle Jims--tired of being bumped around in rattletrap coaches, Bob Young appeared to be a streamlined Galahad on wheels. To fellow railroad men, whom he has unceasingly denounced in magazine articles, full-page ads and speeches for the stagecoach way they run their business, he seemed more like a devil in the firebox.

Young claims that his battle cry that "A hog can cross the country without changing trains--but you can't!" had forced the railroads to start the first through transcontinental service. He had sounded off about a lot of things that people had been putting up with and not liking--the block-selling of Pullman space (by which big companies often tied up space they did not use), old-fashioned sleeping cars ("rolling tenements"). He had pulled his roads out of the venerable Association of American Railroads ("that broken-down lobby") and this month will set up his own railroad association.

By these defiant trumpet blasts he had established himself firmly as the champion of the people against what he loved to call the "banker-dominated railroads." The Department of Justice, blessing his efforts, had asked the Supreme Court to take away the Pullman Co. from 35 railroads which wanted to operate it, and turn it over to Bob Young.

Help for Alleghany. Popular champion that he was, Bob Young also had his hands on a greater potential monopoly than any other railroader. He got his hands on it when he bought control of Alleghany Corp. in 1937. This fantastic financial Humpty Dumpty, put together by Cleveland's famed Van Sweringen brothers, O.P. and M.J., was one of the worst examples of giddy railroad financing of the '20s. After it crashed in 1932, no one thought it could ever be put together again.

But Bob Young, then an obscure Wall Street millionaire with a sharp eye for bargains, thought the potential whole was worth the pieces. For $4,000,000 cash which he and some friends put up, he bought control of Alleghany Corp. from George A. Ball (Ball Mason jars), who was dabbling in rail stocks. (Another 1.2 million shares were held by Ball as security for an additional $2 million which Young needed to complete the deal.) For this small amount of money, Bob Young got close to $2 billion worth of assets, on the books. The assets included either large stock interests or outright control of a dozen railroads with 23,000 miles of track, coal mines, trucking companies, peach orchards. And some trouble.

Trouble came from the House of Morgan, which had financed the Van Swerin-gens and wanted to keep Young out; from the ICC (which Young insultingly called "that tool of the bankers"). By his lawsuits, Young got to be known as the "most litigious man in Wall Street, who would sue anyone at the drop of a subpoena."

Just when it seemed as if he could hang on no longer, Young sued Ball, and collected $4,000,000 (including Ball's Alleghany holdings) from him on the grounds that even the low price of the $2 billion empire had been rigged too high. Then Bob Young persuaded the ICC to order rail securities sold at competitive bidding, thus knocking Morgan, Stanley & Co. and other New York bond houses which had fought to bar Young from Alleghany out of much fat business once given them by friendly railroads. By then Young's sandy hair had turned white and his self-esteem had become somewhat Napoleonic.

Help from ICC? Just how he was going to assert .his claimed control of the New York Central he did not know--at the moment. But Young intended to get his men on the Central's board somehow. If

Chairman Vanderbilt gave him trouble, Bob Young thought he could take care of him. Said he: ''He's a good friend of mine, but in this business he's a mere child." As for Morgan, Stanley, which Bob Young persists in calling the Morgan crowd, although they have no direct connection with the bank, he snorted:'"If they start another fight they ought to have their heads examined. If I can't get along with these fellows this time, I'll make a twentieth-rate bank out of the Morgan bank."

Actually, the final arbiter will be the ICC. Once it had forced the Central to sell the C. & O. because it was "not in the public interest" for the Central to own a competing road. Bob Young expects to convince the ICC that it is now in the public interest for the C. & O. to control the Central. (Until he does, the ICC has ruled that the Chase Bank will vote his Central stock.) When and if he does get control, he plans to mesh the Central into his other railroads. Next step in Young's master plan is to gain control of the bankrupt Missouri Pacific railroad, now fat with war profits. By virtue of the stock he held in it before it went broke, Bob Young hopes to have control, when it is reorganized.

As for trackage rights to San Francisco, he said airily: "There's always ways of picking them up--like we're picking up the Central." As his interests in Missouri Pacific lie with the common stockholders, he is once more using his cry of "banker domination" to good effect. If & when he gets MOP, Bob Young's master plan will have gained him what Railroad Barons Fisk and Hill tried to get--a railroad system running from coast to coast.

Far from the Boiling Pot. While all these potential rewards and troubles boiled furiously, Bob Young spent most of last week in the piny woods of northern Florida, expertly banging away at quail. He was the guest of Mrs. George F. Baker Jr. on her 13,000-acre Horseshoe Plantation. The Baker family has been associated with the House of Morgan for several decades, but Young is often the best of social friends with his business enemies. His hunting companions at the Baker estate were the Duke & Duchess of Windsor, with whom Young and his wife are on first-name terms. The Windsors are spending the rest of the season with the Youngs at Palm Beach.

But quail and Florida were not Bob Young's whole concern last week. As usual, he kept in daily communication with his New York office by telephone. Says he: "If I didn't keep my guard up all the time, those goddamned bankers would scalp me in a minute." (His habit of pronouncing "goddamned bankers" as if it were one word is so familiar to his banking friends that they no longer feel sworn at.)

Some bankers still bristle at Young's methods. Once Young was told by a banker that his lawyer had advised against handling a C. & 0. bond issue. Young snapped: "Why don't you get another law firm that will give you a favorable opinion?" Young's enemies, necessarily numerous because of his many lawsuits, call this "cutting corners." Young's friends call it "getting things done."

Closeup, Young neither looks nor acts like a fighting man. He is quiet and soft-voiced, shows anger only by a slight tightening of his lips, a slight glint in his pale blue eyes. Only 5 ft. 6 and weighing only 135 Ibs., his body seems fragile. His thin shoulders are stooped. He looks more than his age: at 50, he could easily be taken for 65. His narrow face is florid and wrinkled, with the kind of puffiness that usually spells dissipation. "My dissipation," says Young, who doesn't smoke and only occasionally takes a cocktail, "is my work."

Far from the Office. Young does his work as far from Wall Street as possible. With a personal fortune estimated to be in the neighborhood of $10 million (he draws only $20,000 a year as board chairman of Alleghany, another $7,500 as board chairman of C. & O.), he lives most of the year at Newport, in a 40-room Tudor-style house, "Fairholme," where a picture of Napoleon by David hangs in his room. From there, he usually goes to New York each Monday night, goes back each Thursday night. As befits a railroad baron, he always travels in his private car. His Cleveland office is a Kubla Khanish relic of the Van Sweringens. But his offices in Manhattan's Chrysler Building are small and unlisted on the building directory. He does not need a large office because "I carry the business in my head."

In Palm Beach, where he now spends his winters, he lives in a large, cream-colored Spanish villa called "The Towers," which he bought last year for $160,000. Young ordinarily gets up at 6 a.m., goes for a quick dip in the surf, eats a quick breakfast, then quickly gets to work. His workroom is a second-floor bedroom facing the ocean. For a desk he uses two ordinary card tables, pulled together. Scorning ghostwriters, he writes all his own magazine articles, personally turns out copy for C. & O. ads.

Afternoons, Young tries to get in some golf, often breaks 80. At night, he likes to read. His favorite authors are Mark Twain and Dumas (Young sometimes refers to himself as "the D'Artagnan of the 20th Century").

For long the upper stratum of Palm Beach and Newport society was chilly toward the Youngs. In 1936, they gave their only child, Eleanor, one of the most spectacularly lavish coming-out parties in Newport's history. But since 1941, when Eleanor was killed in an airplane crash, the Youngs have become much less active --and entirely acceptable. If nothing else, their closeness to the Windsors would generally insure them top seeding in social tournaments.

Punk & Railroad. Out where Bob Young was born, in the Texas Panhandle, the Social Register doesn't mean a thing. His father was a well-fixed cattleman, banker and hotel proprietor in the little cow town of Canadian.

Young was a runt of a boy with a large head and orange-colored hair. Inevitably, he was called "Punk" (short for "punkin-head"). Because of his initials, one prophetic friend called him "Railroad." As a boy, Young learned how to ride horses, handle guns and use his wits to compensate for his lack of bulk.

A whiz at English and math, he graduated at the head of his class from Indiana's Culver Military Academy, went on to the University of Virginia to study law. He spent more time playing poker and shooting craps. He did not bother to finish his first year because in April, at the age of 19, he married Anita O'Keeffe,* a girl from Sun Prairie, Wis., whom he had met at a party in Charlottesville.

Under draft age in World War I, Young got a job cutting smokeless powder at the Du Pont war plant at Carneys Point, NJ. at 28-c- an hour, ended up in the Du Pont treasurer's office in Wilmington. In 1920, having inherited $15,000 from his maternal grandfather, he moved to New York and went broke playing the market. He went to work for General Motors and was earning $35,000 a year as assistant treasurer when he left, in 1929, to become financial adviser to the late John J. Raskob, then top financial man at Du Pont. When Young advised Raskob that the bull market was going to collapse, Raskob fired him for his pessimism.

But Young sold short himself and made his first million. Soon he bought a seat * Sister of famed Painter Georgia O'Keeffe. on the Exchange, set up a brokerage shop with an old friend from G.M., Frank F. Kolbe. Young, Kolbe & Co. nourished on the Depression. The firm specialized in the fine art of grabbing up securities that looked worthless, then stepping in to run the properties involved. By 1937, Bob Young had added another $4 million or $5 million to his bankroll, and considered retiring.*

But then he got interested in Alleghany. Young needed more cash than he wanted to risk himself, so he wrote a letter to an associate, Allan P. Kirby, the shy heir to a multimillion-dollar fortune made by his father in the F. W. Woolworth Co. Young told Kirby that he had a good proposition lined up, and Kirby came through with $3,000,000. The obliging Mr. Kirby, now president of Alleghany Corp., has been the financial angel in many of Young's deals ever since. It is actually Kirby's holdings, some 550,000 shares of Alleghany, which give Young his control. In short, Kirby has supplied the cash, Young the plan to use it. Partner Kolbe, now president of Chicago's United Electric Coal Cos., has long since sold out.

Outside railroads, Alleghany Corp. has some ten subsidiaries. The chief one is the Pittston Co., a holding company for various coal-mining interests. Outside Alleghany Corp., Bob Young's biggest investment is in Pathe Industries, Inc., a catch-all holding company. Its chief subsidiaries make, process and distribute movies. Young has already poured $20,000,000 into his new producing subsidiary, Eagle-Lion Films, Inc., hopes to turn it into a major Hollywood studio. For Eagle-Lion, Young has made a deal with British Cinemagnate J. Arthur Rank to distribute ten of his pictures in the U.S. while Rank distributes Pathe's in Europe. Next week, Pathe will distribute its first major Rank picture, The Adventuress, starring Britain's Deborah Kerr (TIME, Feb. 10).

New Blood. No matter how railroaders sizzle over Young's iconoclastic methods, in their cooler moments they all admit that he has done a good job in putting Alleghany Corp. on its feet. He paid off some $78,000,000 of its debt, sold off companies in the red, worked to get some of the bankrupt roads out of receivership and simplified Alleghany's structure so that last year it made an estimated $1,700,000 (not including $655,000 received for reorganization bonds credited to cost). He has also done an excellent job in operating C. & O., although railroaders usually shrug this off with the explanation that C. & O., as a big coal carrier, has always been a big moneymaker.

Nevertheless, Young has cut the debt of the C. & O., the Pere Marquette and Nickel Plate by $100,000,000. He has gathered enthusiastic operating men about him, notably Robert Bowman, 55, the intense president of the C. & 0. and Pere Marquette, and Robert Purcell, 35, vice president and C. & O. general counsel, as quick-witted as he is amiable. Like Young, many of them are young enough in railroading not to know the things which old railroaders are dead sure can't be done.

Actually, U.S. railroads are not as moss-backed as Bob Young sometimes seems to believe. Although Young has talked much about passenger comfort, the C. & O.'s crack passenger trains are no better than those of other lines, probably because the C. & O. is chiefly a freight hauler (biggest load: coal). And the big roads are spending money like tipsy brakemen for new equipment, nearly $1 billion in all. But it is also true that the roads are not doing enough to win back the passengers lost to buses, planes and autos. This year, due to higher operating costs and falling traffic, many U.S. roads will still end up in the red. Bob Young feels that if the roads get in the red and stay there, the Government will step in and take them over. He says: "That's the last thing I want to see but that's what we'll have if the railroads don't wake up."

No reformer for reform's sake, he wants the roads to improve for their own financial good. As a sample of the kind of wholesale reform needed, Bob Young has ordered $28,000,000 worth of new coaches and sleepers for the C. & O. lines, plans to replace every coach now in use. Some of his other passenger-catching gadgets: movies in lounge cars, credit cards permitting passengers to charge tickets, meals, etc. (started this week), telephones which can be operated from moving trains, news tickers, games for children & adults. Most of all, he believes that the railroads must spend as much as $100,000,000 a year to advertise and promote their new equipment.

Bob Young thinks that all the railroads really need can be brought about by prodding, and that he is the logical man. to do it. Says he happily: "The goddamned railroads are 30 years behind the times. But maybe in a few years we'll get them to where they're only twenty years behind."

* An amateur versifier, Young then wrote: Sad are my thoughts for I am forty . . .

Until today it seemed my path led upward, But now I find myself upon a constant down ward slope Which gains in pitch until I see Dim, distantly, a void, From which departed friends have vainly turned tired faces, And love has lost its zest, The quest of fortune ended . . .

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