Outlook: Brighter

The nation's largest railroad, the Pennsylvania, last week reached over to the nation's eleventh largest for its new chief: Stuart Thomas Saunders, 54, a Harvard Law grad ('34) who made an impressive record as president of the money-making Norfolk & Western. He succeeds Chairman James M. Symes, retiring at 66 after 47 years with the Pennsy.

Saunders clearly intends to follow the same track as he did at the N. & W.; merge and make more money. He cut costs by modernizing rolling stock and linking up with the complementary Virginian, and earned $65 million after taxes on revenues of $250 million last year, while the Pennsy's profits were only $12.5 million on $906 million. Saunders will aim now to bring off the much-discussed merger between the Pennsy and the New York Central--a combine that Saunders himself would probably head.

The Saunders appointment, which helped to lift the Pennsy's stock last week, came at a time when almost all railmen, dour for so long, are smiling for a change. Rail shares on the Dow-Jones average have risen more than 50% since last October. They briefly touched a seven-year peak last week. Because of the economy's general strength, the Association of American Railroads predicts that carloadings in this year's third quarter will rise 3% over the same period a year ago. The backlog of orders for new freight cars has jumped from 14,000 in mid-1962 to 23,000 in mid-1963. Newly liberalized depreciation allowances have helped to increase profits and dividends so far this year for major lines, including the Southern Pacific, the Gulf, Mobile & Ohio, and the Northern Pacific. The Interstate Commerce Commission's recent approval of consolidation of the Chesapeake & Ohio and the Baltimore & Ohio has raised hopes that many railroads will be able to merge away their troubles.

Last week directors of the much-courted Rock Island voted to merge their line with the Union Pacific and to sell their southern trackage to the Southern Pacific. The deal would pay Rock Island shareholders about $30 a share for stock that is now selling for $25, also give the Southern Pacific a coveted gateway to Kansas City.

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