Young Takes Over

For once, Bob Young had been too cautious in a public statement. He had predicted that he would win the New York Central proxy fight by 700,000 to 1,000,000 votes. His actual margin: 1,067,-ooo, or 267,000 more than the disputed 800,000 shares voted in his favor by Texas Oilmen Clint Murchison and Sid Richardson. Central President William White, conducting his last stockholders' meeting in a hot, sticky office at the Albany railroad station, with blinds drawn for an air-raid drill, sadly made the official announcement that Young had bombed him out of his job. There would be no quibbling or court fights. Said White: "The time for that is past... I will not remain as president of the New York Central.

I will nevertheless cooperate with the new group in effecting an orderly transition.'' Young, who knew the result three days earlier (when it was also leaked to the press), wasted no time taking over the world's second biggest railroad. Less than an hour after the official count was announced, Young and Mrs. Lila Bell Acheson Wallace, a member of his directors' slate and co-owner of the Reader's Digest, marched out of his offices in Manhattan's Chrysler Building and walked the three blocks to the Park Avenue offices of the Central. There his group of directors, who had been asked to stand by were gathered in the Central's board room.

First business was to elect Young their new chairman -- at $1 a year. Next they named Alfred E. Perlman, 51, executive vice president of the Denver & Rio Grande Western, as the Central's new president (TIME, June 7) and chief executive officer.--Take a Chance. Young and Perlman had met for the first time only 20 days before. But Perlman had been carefully scouted much earlier by Thomas J. Deegan, vice president of Alleghany and, as Young's righthand man, director of the campaign for Central proxies. As second in command (under Judge Wilson McCarthy) of the middle-sized D. & R.G., which has 2,300 miles of track in Utah, Colorado and New Mexico, Perlman built up a reputation as an outstanding railroad man. What was closer to Young's tastes, he was also one who was not afraid to try out new ideas.

What will Perlman do with the Central? Disregarding for the moment Young's high-flown proposals, such as the lightweight Train X, roller bearings and refrigerated cars, he says he will first "spend six months getting acquainted Those present: Allan P. Kirby, Young's side, kick and president of Alleghany Corp.; Earl E. T. Smith, New York Stock Exchange member and former husband of a descendant of Cornelius Vanderbilt; Dr. R. Walter Graham, Baltimore physician; William Landers of Utica, retired Central engineer; D. E. Taylor, president of West India Fruit and Steamship Co. of Norfolk, Va.; Frederick Lewisohn, New York Stock Exchange member; Richard M. Moss, president of Clinton Foods, Inc. of Manhattan; Mrs. Wallace; Eugene C. Pulliam, publisher of the Indianapolis Star,and News; Orville Taylor, Chicago attorney; Andrew Van Pelt of Philadelphia, Alleghany Corp. director; William P.

Feeley, president of the Greak Lakes Dredge & Dock Co. of Chicago. The two absentees: Murchison and Richardson, who are already busy lining up a new deal (see below). with the personnel and the problems .

Changes will come slowly." He plans no big shakeup of the Central staff, is not even bringing along his own private secretary. Instead, among the Central's 100,000 employees, he wants to find a team to help him "build a good foundation for the railroad." Try Research. A graduate of the Massachusetts Institute of Technology, Perlman got his start in railroading as an engine-wiper before moving into the engineering end of the business. After a stint in the RFC's railroad division and at the Burlington, he joined the bankrupt D. & R.G. in 1936.

A bug for research, Perlman saved the road $1,000,000 a year by a scientific check on fuels and oil, e.g., he stopped changing oil in his diesels after he found that changes increased engine wear. Another $750,000 was saved by mechanizing track maintenance as far back as 1936, a step that the Central first took last year.

The D. & R.G.'s cost controls were so tight that it knew the exact cost of running each train.

Perlman also developed a "junior board" of bright young employees to keep a constant check on all operations and to make recommendations directly to top management. As a result of his improvements--and war traffic--the road came out of bankruptcy in 1946. After 76 years in which not a nickel was paid in dividends, the railroad made its first payments in 1947. Last year it paid $6 plus a 50% stock dividend on earnings of $14.79 a share.

Improve Service. Perlman will have to be a railroad genius to do that well with the Central. The road's earnings for the first four months of this year were only $29,894, v. $10,269,710 a year ago. The road is also saddled with more than $800 million in long-term debt, one of the biggest loads of any U.S. railroad, and well over $100 million of it will fall due in the next ten years. Operating expenses are high (82.8% of operating revenues last year, v. an average of only 76% for all major railroads), and the passenger deficit, even after operating economies, was $55 million last year. But Perlman is not worried about the passenger deficit. Says he: "The passenger business is like the show window at Saks Fifth Avenue. [By improving the service] you bring in people by the show window." Quiet, modest and diffident as a church usher, Perlman expects to have a free hand in running the Central. Says he firmly: "I would expect to follow the advice of the board in matters like refinancing . . .

But the actual running of the railroad and all its departments I would want to handle." In line with this, Perlman will attend directors' meetings and was promised the next vacancy on the board. But among those who know Bob Young best, there was little doubt that he would be the Central's real boss.

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