Help Wanted

RAILROADS Help Wanted

"A mighty industry has come upon sick and precarious times. Our railroads are in a very serious condition." Thus last week did Florida's Senator George Smathers, chairman of the Senate Surface Transportation Subcommittee, sound the keynote for a five-day public hearing in Washington. To the marble-pillared Senate caucus room he summoned a parade of more than two dozen railroad executives to describe what ails the railroads and suggest how to cure it.

The hearings came at a time, said Smathers. "when the economic danger signals for the railroads have become even more ominous." Carloadings were down 19.8% last week from the same week last year, after ending 1957 at their lowest point since the 1930s. Net income in November, the last reported month, was down 33% from two years before. The business recession played its part in the railroad's current plight, but that was not the main problem railroadmen had come to lay in Congress' lap. The real trouble with U.S. railroads, said Daniel P. Loomis, president of the Association of American Railroads, is the maze of Government controls that prevents them from working out their own problems.

$500 Million Loss. The New York Central's President Alfred E. Perlman testified that his road has lost $500 million in passenger service since 1946, largely because a "chaos of regulation" by both Federal Government and states prevents the road from raising rates or cutting out little-used and unprofitable routes. To dramatize his point, Perlman reported that a three-year-old request by the Central to cut rail and ferry service across the Hudson River into Manhattan is still pending, despite the fact that the railroad has lost $3,000,000 a year on the line during the period, "enough to provide a Chevrolet for each of the less than 4,000 commuters using the service." Perlman asked for changes in the law to let railroads set their own passenger fares and service, or at least to put all passenger regulations under the Interstate Commerce Commission instead of under state agencies that "often tell the railroad opposite things."

Just as serious as the passenger problem, in the railroadmen's view, are Government controls that prevent the railroads from cutting their freight rates to competitive levels, thus letting much of their freight business go to trucks. Baltimore & Ohio President Howard E. Simpson argued that Congress should pass a law to permit transportation systems to cut rates "irrespective of the effect upon competing modes of transportation."

Burlington Lines President Harry C. Murphy seconded this idea, also charged that "subsidized competition" was one of the chief reasons for the rails' troubles. While the railroads are forced to lay out more every year for maintenance and to pay local taxes, the "Government spends more and more on airways, highways and waterways for the use of our competitors who contribute little if anything to the cost of local government" through property taxes. James M. Symes, president of the Pennsylvania Railroad, No. 1 U.S. carrier, also pleaded with Congress to end direct and indirect subsidies for trucks, airlines and competing carriers. Said Symes: "What we are asking for is the freedom to compete on an equal basis with subsidy to none."

So long as trucks and planes get help, Symes suggested that the railroads be helped too; he recommended that the Government buy rolling stock and lease it to the railroads at a price that would enable the Government eventually to get its money back with interest. George Alpert, president of the New Haven Railroad, went a step further; suggested that eastern railroads that carry heavy loads of commuters, as "a vital public service," get a "modest" 1% of Government highway funds as subsidy. "As ugly and distasteful as the word subsidy may be," said Alpert, "I consider it a welcome alternative to a loss of service or bankruptcy." But Ernest S. Marsh, president of the Atchison, Topeka & Santa Fe, came out strongly against any Government subsidy for the railroads, was joined by spokesmen from other roads in the South and West, which do not have to cope with the commuter problem. Said Harry A. DeButts, president of Southern Railway: "I would hate to see any further Government control over the railroads."

Help or Else. Almost every top railroadman went to the hearings armed with a set of recommendations designed to ease the railroads' ills. Among them: allow the railroads the full cost of carrying the U.S. mail, now carried at a loss; eliminate the 10% federal tax on passenger fares, passed during the war to discourage travel, and the 3% tax on freight; encourage railroad mergers; allow the roads to diversify more widely into other forms of transportation, such as trucks and planes. Said the Central's President Perlman: "If we fail to convince you of the desperate need to act now, if you fail to act, the nation's railroads will go downhill ever faster, dying of starvation."

By week's end the railroadmen had made a strong case for some sort of legislative relief to help their ailing roads. In expectation of getting it, investors took a more optimistic view of rail stocks, which have been dropping for more than a year and a half. They surged up on the New York Stock Exchange, ended the week up 6.94 on the Dow-Jones rail average.

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