Restoration in the Rockies

Few railroads have been the butt of so many jokes as the Denver & Rio Grande Western. Workers on the Rio Grande (pronounced rye-oh-grand), when ribbed by other railroaders about "that bankrupt hunk of rusty junk," had once had the dubious comeback: "Hell, man, we kill more people every year than you carry."

But the Rio Grande is no longer a dangerous derelict. Now one of the healthiest and safest of U.S. railroads, cockily straddling the Rockies from Denver and Pueblo to Salt Lake City, it ended a long haul back to respectability last week by chugging out of Federal receivership.

When the 77-year-old Rio Grande (built by William Jackson Palmer, a Union general in the Civil War) went into its fifth bankruptcy in 1935, it had lost money five years running, was not taking in enough revenue to cover interest on several of its bond issues. Its 2,400 miles of track, its roadbeds and equipment were scandalously dilapidated.

Enter Doctor. Into this mess moved a quiet, grey-haired man named Wilson McCarthy. A native of American Fork, Utah, and a member of the Church of Latter Day Saints (Mormon), McCarthy started out as a cattle rancher, became a lawyer. did a brief stint on the Utah bench (friends still call him Judge), got into railroading in 1934 as president of the 240-mile Denver and Salt Lake Railway Co. Tobacco-chewing McCarthy scarcely had time to get the range on his D. & S.L. spittoon when, at 51, he was appointed operating trustee of the Rio Grande.

After a lot of turkey-talking with Denver bankers, McCarthy began spending money like a drunken gandy-dancer. He built a safety laboratory, laid out $5 million for a central traffic control system over the road's tortuous mountain trackage,* laid 500 miles of new rail, reballasted roadbeds. He bought 40 streamlined Diesel locomotives, 50 of the world's largest steam locomotives.

Under McCarthy, passenger revenues soared from $990.000 in 1935 to $10 million in 1945, freight revenues from $18 to $60 million. Last year the road reported a net operating profit of $5.6 million.

Enter MOP. McCarthy would hardly rate sole credit for Rio Grande's big revenues in wartime, when most U.S. railroads prospered. But the Rio Grande was doing well enough before the war to have started reorganization proceedings, might have been out of bankruptcy much sooner if it had not run into a legal brawl with the Missouri Pacific. MOP, bankrupt itself, owned 50% of Rio Grande's common stock. This stock was wiped out in a McCarthy reorganization plan approved by ICC in 1943. MOP's fight to get it back was twice carried to the Supreme Court. Last week the Supreme Court ruled in McCarthy's favor for the second time, and the Rio Grande, its other remaining stocks placed in escrow (and thus safe from outside manipulation) for ten years, was finally free and independent.

All it needed now was a president. Most likely choice: Wilson McCarthy. As president, one of McCarthy's first tasks will be to smooth over relations with MOP in which Alleghany Corp.'s spectacular Robert R. Young has a big interest. Bob Young now has his hands full trying to take over the New York Central, merge it with his Chesapeake & Ohio (TIME, Feb. 3). But he has his eye on a vast transcontinental empire. If he can get MOP out of receivership--and take over control in the process--his next westward step might well be a deal with the Rio Grande. Last week Denver was abuzz with reports that Wilson McCarthy had already put out feelers toward a working agreement with Bob Young.

* Four days after installation of the ''foolproof" traffic control system was proudly announced to the press last winter, it failed to function, sent a freight head-on into a passenger train, killing a fireman. The Rio Grande has had no other fatality since McCarthy took over.

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