Fight for the New Haven

Boston's late Frederic C. Dumaine once advised his hockey-playing son: "If a man hurts you on that rink, don't lose your temper. Give it to him cleanly, according to the rules, but give it to him.'' Young Frederic C. Dumaine Jr. never forgot that advice. Now 51 and head of the family's $28 million New England empire, Buck Dumaine last week was in the toughest scrap of his life, fighting according to the rules but as hard as he could.

Wall Street v. New England. The battle was over control of the New York, New Haven & Hartford Railroad. The man Buck Dumaine wanted to "give it to" was Patrick B. McGinnis, the Wall Street railroad juggler who recently collided with the ICC over his expense accounts while boss of the Norfolk Southern (TIME, Feb. 22). In 1948 McGinnis helped old Frederic Dumaine grab control of the New Haven, bought 75,000 shares of stock, largely for clients. But now McGinnis doesn't like the way Buck Dumaine runs the road, and is waging a proxy fight to take over the road at the April 14 stockholders meeting.

McGinnis charges that the New Haven is in poor shape, has not made anywhere near the money it should. Though the road has reported a profit every year since 1949, McGinnis argues that the profits come from the road's real-estate holdings and that the New Haven, as a railroad, has actually lost more than $4,-000,000 under Dumaine management. He says that too much money has been spent on new equipment, dragging the road's operating capital down from $47 million to $11 million in 1953, and that only preferred stockholders have got dividends since the road came out of bankruptcy in 1947. On the operating side, McGinnis charges that in six years the Dumaines lost $61 million on passenger service, which makes up 40% of the road's total business. Says he: "The New Haven is the only railroad that has the density to make passenger traffic really pay." He claims he would do it with better schedules and new lightweight trains.

"Spend It To Make It." In his small, cluttered office in Boston's South Station. Buck Dumaine challenges McGinnis right down the line. As in the American Woolen battle, Dumaine wants to keep the New Haven in New England hands, has tried to run it to bring new trade to the area. When his father took over, Buck set out to become a railroader, worked alongside yard crews, poked his 6-ft. frame into every corner of the business. Buck, who became president in 1951, is proud of his record.

The New Haven is a short-haul line through a densely populated area, with heavy commuter loads and relatively little freight. To make it pay, Dumaine has tried to chop down costs and at the same time modernize the road to attract business. Many of the big, barnlike stations of the '20s have been replaced by revenue-producing business blocks; Dumaine money built a $50 million marketing center in congested Boston near the South Station that draws some $200 million yearly in various businesses and fat contracts for the New Haven to haul the goods. At a cost of $70 million, the New Haven has been completely dieselized and electrified, now has some 1,300 new units, including 40 self-propelled Budd cars (the largest U.S. fleet), 362 new diesel-electric locomotives. Piggyback cars for carrying trucks have been increased until they produce $2,000,000 in revenue each year (100 more, plus 115 air-conditioned passenger cars are on order for 1954), and Dumaine has torn up 340 miles of track no longer needed and rebuilt 400 miles of roadbed at a cost of $10,000,000. Says he: "You must spend money to make money."

Buck Dumaine insists that McGinnis is wrong when he says the New Haven runs at a loss. In a proxy statement fired off this week, he argued that every railroad counts nonrailroad revenues in its profits. The fact is that the road's total revenues have increased steadily in the last five years to $165 million in 1953. Net income was equal to $12.16 a preferred share, with $7 disbursed in preferred dividends. The New Haven's debt has been cut by more than $50 million through retiring securities and the purchase of bonds, thus cutting interest charges by nearly $2,000,000 a year. Common stockholders got no dividends, says Dumaine, because of unpaid preferred dividends accumulated when the road was in the red. Some $26 a share has been paid off, and the balance now stands at only $4.

To the Last Proxy. Both Dumaine and McGinnis were supremely confident of winning control, but they knew the fight would be close. McGinnis and his allies own some 30% of the New Haven common and preferred stock (1,015,585 shares outstanding), claim that under the New Haven's cumulative-voting procedure,* they are sure to get eleven directors, enough to control the road.

Buck Dumaine is just as confident, thinks the question is not whether he will control the company but by how much. Family interests alone control some 28% of the stock (273,399 shares), and count on getting another 175,000 shares in stockholders' proxies, plus at least half of the 150,000 shares held by brokers. If he gets all of these, he will have more than enough to keep control.

* Each share is entitled to one vote for each of the 21 directors. The votes can be cast in a bloc for one director or split among the other directors.

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