Friday, Nov. 30, 1962
Toward a Broader Gauge
Few U.S. railroads have as colorful a history as the 111-year-old Illinois Central, whose 6,466 miles of track run like steel spines down mid-America from Chicago to the Gulf Coast. Young Abe Lincoln was a lawyer for the I.C. for seven years. Civil War generals such as the Union's George B. McClellan and the Confederacy's P.G.T. Beauregard were once officials of the line. The real-life Casey Jones was an I.C. engineer at the turn of the century: "Casey's daughter fell on her knees / 'Mama, mama how can it be / Papa got killed on the old I.C.?' "
Casey himself would cry if he could see the plight of the modern I.C. Hit by competition from highways, waterways and airways, the road has watched earnings slip from $26.5 million in 1955 to $12.7 million last year. It has sought salvation through diversification, only to be blocked by the Interstate Commerce Commission, which still treats the railroads as if they were the monopolistic Goliaths of the past. To get around this, the I.C. last week applied to the Securities and Exchange Commission for permission to switch to the status of a holding company, which would control the railroad but be free to diversify outside of transportation. If SEC and stockholders approve as expected,* the I.C. will exchange its 3,135,415 shares with its stockholders on a one-for-one basis, convert itself into Illinois Central Industries Inc., and start diversifying next summer.
"A very desirable possibility" for diversification, says the I.C.'s highly rated President Wayne A. Johnston, 65, would be the construction of offices or apartments on the scenic lakefront lands that the I.C. owns near Chicago's Loop. "We might also acquire some manufacturing firm that would produce a lot of traffic for the railroad," says Johnston. "Almost any promising venture will be considered, whether it be a jewelry store or a hamburger stand." Illinois Central Industries would be forbidden to acquire directly competing transportation companies, but beyond that it would be a fairly free agent.
The new holding company would have a good base for expansion: some $60 million in cash for spending. In fact, the plan is so promising that other railroads are considering taking the track into holding companies.
* With Government approval, holding companies have been set up by two smaller lines, the Kansas City Southern and the Bangor & Aroostook. The I.C., eleventh biggest U.S. railroad, is the first major line to apply.
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