For more than 14 years, the Milwaukee Road (officially the Chicago, Milwaukee, St. Paul and Pacific Railroad Co.) strongly opposed the merger of several midwestern railroads into what would become the Burlington Northern.
Milwaukee Road officials warned the Interstate Commerce Commission that if the merger were approved, the Milwaukee Road would not be able to survive the competition.
The merger was approved on March 2, 1970, and - sure enough - the Milwaukee Road filed for reorganization under the federal Bankruptcy Act seven years later.
The tale of the Milwaukee Road is really just one more story of what some say is the decline and fall of railroads, particularly in the Midwest. Actually, the Milwaukee Road is better off than many. When the Milwaukee went under, there was still some cash in the till, and the employes continued to work under reorganization. When the Rock Island railroad went under in 1975, it had run out of money and, with its back to the wall, it almost had to shut down for a time during reorganization.
ICC Chairman Dan O'Neal has to be careful of what he says about any railroad company, especially in financially troubled times: "One of the concerns I have is saying anything that might jeopardize the capacity of one of these railroads to obtain financing," he says.
"There are problems in the Midwest. And it is probably going to get worse before it gets better."
O'Neal says things are still getting worse for the Milwaukee Road. "There is concern about whether service provided by the carrier can be maintained," he says, placing at least some of the blame on poor weather conditions in recent months, which have "caused real problems."
The Illinois Central Gulf railroad has made "important strides, as far as increasing the amount of money spent improving property and equipment," O'Neal says, but he won't comment on its condition. He also says that the Chicago & North Western Transporation Co. "has shown some improvement."
Other Midwest railroads, like the Katy (Missouri-Kansas-Texas RR) and the Kansas City Southern, are also seen as having financial problems.
"It seems to me that, without prejudging the situation, we are moving toward more mergers and fewer and larger railroads," says O'Neal, a former Hill staffer with a penchant for reform.
"There is just too much track in the United States," says William J. Taylor, president and chief operating officer of the Illinois Central Gulf Railroad. "Everybody agrees that we have to reduce the tracks being used, but at every specific instance where a reduction has been requested (before the ICC), there is resistance."
"The rail system in this country has to be rationalized," Taylor says. "The role of the railroad should be in longhaul, high-density traffic."
Taylor points to an ICG route map on his wall, a tangled web of lines through many midwestern states from Illinois down to the Gulf of Mexico. "We are trying to unload 2,000 of 9,000 miles of track," he says.
O'Neal tends to agree with Taylor's assessment of the role of the railroad as a long-haul shipper. "One of the problems railroads have had is that it is now possible for an exempt trucker to haul fresh fruits and vegetables coast to coast, while railroads don't have that luxury," O'Neal says. "Trains still have to move in and out of switchyards."
The chairman says there is movement towards allowing railroads to go coast to coast without the traditional problems.
But back in the Midwest, an official for the ICG points to the kind of labor problems faced by the struggling railroads. "In order to take a train from Chicago to Omaha, which is about 450 miles, we have to change crews three times, and pay to leave each crew to sit in each city," says the official. "And those crews don't include the yard crews. Every time the train approaches a yard, it stops outside the yard and lets the yard crew take over."
Although the unions have lowered their demands for wage increases from 15 percent a year to about two-thirds of that, the railroads are offering about 3 percent a year over three years. But the key issue remains crew size and manning needs, and that familiar catchwood - featherbedding.
"The truth is, we face a potentially disastrous rail situation in the Midwest, and the dimensions of that problem - and the costs of coping with it - will only be aggravated by delay or vacilation," says Transportation Secretary Brock Adams.
Adams has had more than a passing interest in the rail situation. As a member of Congress five years ago, he assisted in putting together the Railroad Revitalization and Regulatory Reform Act (The 4-R Act), which was finally signed into law in 1976, and which provides $2.1 billion in federal assistance and $1.75 billion for the Northeast Corridor Improvement Project.
"We suspected then, and it has since become abundantly clear, that the rail industry's problems would not be totally solved by the 'Quad R' Act," Adams says. Although he has come out against a federal takeover of the rails or the rail beds, he sees some federal role in providing resources to assist the private secotr solution "by encouraging voluntary actions by the rail managements, state governments, shippers and labor to consolidate operations and redistribute or eliminate duplicate or uneconomic track."
Adams believes "that a well-orchestrated revision of the midwestern rail network could produce a slimmed-down, leaner, more efficient system - sufficiently structured to provide needed levels of service and strong enough to survive."
One proposal forwarded by Rock Island President John Ingram is called "FarmRail," a consortium of five Midwest railroads not unlike Conrail, which was created out of six bankrupt railroads in the East. Conrail officials have acknowledged that it is going to cost the federal government considerably more money than originally planned to get it going.
"I don't want a Conrail West," Secretary Adams says. "To capitalize Conrail, we thus far have authorized $2.1 billion in preferred stock and income debentures. So you can understand why I don't want to go back to Congress and says. 'We're going to do it again."
Adams claims that comparing the Midwest rail situation with the situation in the Northeast ten years ago that led to the creation of Conrail is like comparing apples and oranges.
"For one, the economies of the two regions are different," says Adams. "Generally speaking, the economic decline was sharper in the Northeast relative to the rest of the country. The railroad structures themselves are also different. The Penn Central was far more dominant in the Northeast than any single carrier is in the Midwest. Seven other carriers representing nearly all the mileage in the Northeast were in bankruptcy. Moreover, in the congested Northeast, a manufacturer is often dependent on a single rail line, with no or few other shippers using that same line."
But in the Midwest, shippers frequently have a choice of several lines, says Adams, "the result of spider-web rail construction in the last century which spun track in all directions throughout the Plains." And, the Midwest is still productive and in need of extensive shipping operations to carry both industrial and agricultural products to the rest of the nation.
Claiming that business in the Midwest is available to railroads and that shippers want better service from carriers. Adams says that much of the excess plant in the Midwest can be "restructured without terminating service to any important shipping point."
He calls for market swaps, or trades by which two railroads serving the same two markets can give each other a monopoly in one of the markets and cut duplicate service - perhaps even eliminating some parallel trackage.
Joint use arrrangements are also possible in which more than one railroad can share facilities with others whenever the situation warrents, thus consolidating overhead costs and allowing abandonment of even more unneeded track.
And Deputy Federal Railroad Administrator Robert Gallamore, who Adams has placed in charge of studying the Midwest situation and working with the railroads, says "we would like to see more states using the Iowa plan."
The Iowa plan is a cooperative venture among the railroads, shippers and the state - with financing from all three - "to get together in an effort to upgrade the rail system," says Gallamore. Essentially, the state provided seed money to help the railroads put together a more reliable and useful rail system. At least one state, South Dakota, appears close to working out a similer arrangement.
But Gallamore still believes that the rail industry has to gear up for a "long-term decline relative to other modes of transportation. There is a shift in the nature of our economy from heavy industrial goods to more of an emphasis on light manufacturing goods and services, and a shift in regional economies to be considered."
"Our objective, however, is to see that rail service is provided profitably and safety by the private sector." he says.
And that concept isn't so unbelievable. Many of the western railroads are doing extremely well financially, and are expected to do even better after ICC approval of some more proposed or hinted mergers.