Streamlining the Central

When Alleghany Corp.'s Robert R. Young won control of the venerable New York Central last spring, he found a corporate rat's nest of affiliates and subsidiaries that had been thrown together over the years. In an application to the Interstate Commerce Commission released last week, Young made his first move to tidy up the nest by merging a couple of the Central's subsidiaries. His plan, said Young, was part of a general program "to simplify the internal structure of the Central system by mergers, consolidations, leases and/or other acquisitions of properties."

Young picked a fine test case from among the 90 companies in the Central system. It involved the Louisville & Jefferson ville Bridge & Railroad Co., which owns a bridge over the Ohio River between Jeffersonville, Ind. and Louisville, with terminals and freight yards at each end. The bridge company is a wholly owned subsidiary of the "Big Four" (the Cleveland, Cincinnati, Chicago & St. Louis Railway), and the Big Four, in turn, is 97% owned by the New York Central. Young wants to merge the bridge company with the Big Four.

Young's plan was a test case in another important respect. In his application to ICC he included a petition asking that Alleghany be allowed to keep its status as a carrier. Earlier this year, after Alleghany sold control of the Chesapeake & Ohio (TIME, Feb. 1), ICC moved to strip Alleghany of its carrier status, since its chief holdings were no longer in railroads. The Securities and Exchange Commission then indicated that it wanted to bring Alleghany under its jurisdiction as an investment trust. Bob Young wants to avoid that at all costs, since SEC's regulation (under the Investment Company Act) of Alleghany's financial deals would be far more restrictive than ICC's. Last week, for example, SEC pointed out that under the Investment Company Act, Alleghany might not have been able to sell the C. & O. to Young's old friend Cyrus Eton, nor make the deals with Texans Clint Murchison and Sid Richardson in the Central fight. In short, it would have been harder--if not impossible--for Young to get control of the Central.

At week's end SEC notified ICC that it was ready to take Alleghany under its regulatory wing, since the company now has only about 16% of its assets invested in carriers v. 86% nine years ago, when it first came under ICC regulation. Argued Young: Alleghany is as much a carrier as ever, since its "relationship to the Central and its affiliated carriers is in all material respects the same as its relationship [was] to the C. & O." Slow-moving ICC took the matter under advisement.

Last week Young reported that the New York Central netted $828,750 in August, the third month of Young management, v. a loss of $318,482 in July. Deficit so far this year: $6,200,000 v. a net of $23 million in the same period of 1953. Chief reason for the August profit: Central's operating costs have been cut $7,000,000 under a year ago.

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