Savior with an Ax

When William N. Deramus III, 41, took the throttle of the 3,240-mile Missouri-Kansas-Texas line three months ago (TIME, Jan. 21), railroaders agreed that the new president would put the coughing Katy back on the tracks if anybody could. With a reputation as a savior of sick railroads, Deramus came to Katy fresh from rescuing the Chicago Great Western Railway Co. from heavy debt, hoped to do the same for Katy, whose earnings skidded 37% in 1956, and whose preferred stockholders were due $106 million in dividend arrears. In short order, Deramus trimmed the Katy's payrolls, ordered economies in everything from telephone calls to recordkeeping, even abolished his public-relations department at the St. Louis headquarters. Last week Railroader Deramus took the boldest step yet to cut costs.

Out in the Night. Without notice, the Katy secretly closed most of its St. Louis offices, moved them 500 miles southwest to Denison, Tex. In the dead of night, outside movers cleaned out the 15th floor of the Railway Exchange Building, and the third floor of the freight house on the fringe of downtown, quietly hauled away desks, cabinets and records aboard 23 moving vans. On Monday morning unsuspecting Katy employees reported with lunchboxes in hand to find an armed security officer on guard before darkened, empty offices. Cried one woman clerk of 33 years' service: "Oh heavens! I left my glasses in the desk." No one was on hand to tell her what to do. All Katy executives were ordered to stay away from the office. Terse, printed notices advised the 115 displaced workers that they were out of jobs unless they reported to Denison within 48 hours; the company offered them transportation and a week's lodging aboard vintage 1910 Pullman cars, plus $4 daily for food. About 65 workers made the trip; the other 50, some with 40 years service, got two days' salary in severance pay.

St. Louis was outraged, not so much at the move itself, but at the way President Deramus did it. After a short, angry meeting, the city's Chamber of Commerce expelled the Katy from its ranks after 45 years of membership. Snapped the Chamber: "The treatment of these employees by the Katy is out of character with responsible business practices and does a great disservice to management here and elsewhere."

Cuts in Parsons. The Katy had faced a similar situation in Parsons. Kans., where it closed one of its offices a fortnight ago, also tried to move out at night. Hearing of the move, the Kansas attorney general enjoined Katy from shipping its records out of the state, took the road to court charging violation of an old agreement under which it promised to keep at least 347 office employees in Parsons. By shutting down the Parsons office and firing other employees, Deramus had chopped his Parsons work force from 1,300 employees on Jan. 1 to about 800 last week.

During all the uproar. President Deramus kept silent for days, finally released a chilly statement that "emergency measures were necessary to avoid financial embarrassment." Why did the Katy slip out of St. Louis with no warning? Answered Deramus: any advance notice might have caused the state of Missouri to step in and tie up the Katy's records, as happened in Kansas. The road had no other choice but to move. Its maintenance is in bad shape; about 1,000,000 rail ties sorely need replacement, 30 to 40 diesel engines require major overhaul, almost all the Katy's yards must be modernized, and the line is short 250 miles of replacement rail. In sum, it will take a small wonder to salvage the Katy's solvency, let alone its reputation. The railroad turned in a January-February deficit of $519,608. If losses continue at the same rate, railroad men said last week, the railroad will be insolvent within two months.

This file is automatically generated by a robot program, so reader's discretion is required.