Three into One?

At a bull session recently three longtime friends and railroaders--Delaware, Lackawanna & Western President Perry M. Shoemaker, Erie President Paul W. Johnston, and Delaware & Hudson President William White--sat down to chew over some common problems. All three run middle-sized, prosperous Eastern roads, but all face one long-range problem: how to compete effectively against both their own industry's giants and the growing inroads made by trucks and airlines. Last week the bull session grew into something more solid. The roads were talking merger, as equal partners in a single big line that would become the eighth biggest in the U.S., with 4,092 miles of railroad between New York and Chicago (see map), assets approaching $1 billion, and operating revenues of $300 million annually.

Thus far each of the roads has been able to go it alone. The Erie, biggest of the three (2,338 miles), picked up enough revenue carting freight between the Great Lakes and the Eastern industrial area to turn a $7,900,000 profit last year, expects a 10% boost this year. The small (792 miles) D. & H. is also in good shape; through the Delaware & Hudson holding company it picked up 34% of its traffic, mostly from its own coal mines, netted $8,900,000 last year on a gross of $76.9 million. Only the 962-mile Lackawanna is in any semblance of trouble; a $7,500,000 flood-damage bill and heavy losses from its commuters (who fondly call it the "Delay, Linger & Wait," but appreciate its on-time trains) helped drag the road to a $1,000,000 deficit last year. But its freight business between New Jersey and Buffalo is so good that the Lackawanna will climb back into the black in 1956.

Nevertheless, the roads are sure to profit by a merger. All three run parallel routes along sizable sections of track, could save millions in maintenance and tax charges by abandoning some sections, downgrading others. Since all three are dieselized, they would need less equipment, could shift engines from one section to another as traffic demanded, could also combine many duplicating services, from secretaries to freight yards.

While nothing will be done about a merger until a yearlong study is completed, all three presidents were obviously in favor of such a plan. As for the Interstate Commerce Commission, which must approve any merger, it would probably raise a cheer. The ICC has consistently advised U.S. roads to economize and compete by combining facilities whenever they can.

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