Seven Into One?

Since U.S. railroads are in financial trouble as rarely before, more and more railroad men are thinking of mergers. Last week word leaked out of a merger possibility among seven major eastern and Great Lakes lines, discussed recently at a Cleveland meeting of the lines' executives. The lines: Erie, Baltimore & Ohio, Chesapeake & Ohio, Reading, Delaware & Hudson, Nickel Plate (New York, Chicago & St. Louis), and the Delaware, Lackawanna & Western.

The Cleveland meeting was prompted by the proposed merger of the New York Central and Pennsylvania Railroads, which are going ahead with their studies, already have in hand a report on the operational aspects of a merger. It was Delaware & Hudson President William White and fellow railroaders who called executives of the seven roads together at Cleveland to discuss what steps to take if the Central-Pennsy merger goes through. The most obvious: meet merger with merger.

White denied that a specific merger proposal was considered at the meeting, but other railroad men admitted that such a move would be "logical." Said John Barriger, president of the Pittsburgh & Lake Erie Railroad, who drew up the operational report for the Central and Pennsy: "It would be perfectly natural and constructive for other railroads to integrate into a second system. Then you would have two equally balanced systems in the east."

The railroads already have a head start along the merger path. The Erie, the Delaware & Hudson and the Delaware, Lackawanna & Western have been conducting merger studies among themselves since 1956, and the Lackawanna and the Erie got permission from the ICC in July to coordinate some facilities and operations in New York State. With the Erie and Lackawanna operating in the red and the more financially stable Delaware & Hudson hard hit by losses on a coal subsidiary, the proposal would combine three fairly weak roads into a network with assets of $952 million and 5,377 miles of main track in seven states, some of which could be eliminated in a merged line.

A combination of the seven railroads would be equally logical; all have something to offer each other, and two (the B & O and the Lackawanna) own sizable chunks of other lines in the proposed merger (the Reading and the New York, Chicago & St. Louis). A merger of the seven roads would be bigger than either the Central or the Pennsy, the nation's largest road, and nearly as big as the proposed merger of the two. The seven roads together would have 19,050 miles of main track in ten states (including many duplicated facilities), compared with 12,800 miles owned by the Central and Pennsy, and total assets of $4.1 billion, v. $4.4 billion for the Central and Pennsy.

Last week another merger was well past the talk stage. The Norfolk & Western and the Virginian Railway, which share the profitable soft-coal Pocahontas region with the Chesapeake & Ohio, announced that they had started studies for a merger that would add "strength to strength." Both lines are efficient operators but could profit by merging. Their merger would create a new system having 2,695 miles of main track in the South and combined assets of more than $900 million.

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