Railroad Mergers and the Language of Unification

Railroad Mergers and the Language of Unification

Railroad Mergers and the Language of Unification

Railroad Mergers and the Language of Unification


Between 1970 and 1997, the nation's railroads engaged in corporate mergers in an effort to stem the decline of the industry's market base, increase low return on investments, and counter the deterioration of trackage and equipment. The 73 Class I carriers in existence in 1970 have been consolidated into only 10 today. The recent battle over Conrail is only the most recent and highly publicized example of this trend that resulted from the relaxation of federal regulation. Business scholars, economists, railroad buffs, and anyone interested in transportation and federal regulation will find this book an invaluable tool.


And the Lord came down to see the city and the tower, which the children of men budded. and the Lord said, Behold, the people is one, and they have all one language; and this they begin to do: and now nothing will be restrained from them, which they have imagined to do.

Genesis 11:5-6

As the nation's earliest big business, the railroad industry was the first to understand the power of unity so vividly related in the Book of Genesis. in the early 1860s, for example, railroads employed Samuel F. B. Morse's telegraph to coordinate intercarrier exchanges and thereby promote service beyond the rights-of-way of individual systems. the Union Pacific and the Central Pacific joined lines in 1869 at Promontory Point, Utah Territory, thereby permitting the first transcontinental flow of traffic. a collective agreement to standardize time zones in 1883 allowed rail carriers to schedule interstate service, and the adoption of the standard gauge by southern railroads in 1886 facilitated a fuller interchange of cars and speedier operations nationwide.

While these joint efforts generated enormous benefits for railroads and the public alike, rail officials learned that the corporate merger was the most powerful tool for intercarrier cooperation. Mergers could integrate the operations of multiple lines under a single management. They could facilitate new and more direct routes to markets, attract new traffic with single-system service, and permanently eliminate internecine competition. Indirect benefits included a decline in fuel expenditures, the elimination of superfluous line segments, a reduction in labor costs, and better utilization of rolling stock and other equipment.

Railroad companies could also benefit from combinations with corporations outside the business of railroading. They could diversify their investment bases, secure new avenues of capital, and acquire competing modes of transportation. Diversified investment bases might allow rail carriers to withstand more effectively declines in rail traffic while obtaining needed capital from nonrail holding companies or nonrail subsidiaries. the acquisition of water and motor carriers could open doorto-door markets served exclusively by trucking companies and facilitate access to international markets dominated by shipping lines.

From the time the first fledgling systems were operational in the 1830s through the late twentieth century, railroad leaders sought to exploit the benefits of unifications. Combinations were so numerous in the 1880s and 1890s that by the turn of the century, more than 15 percent of the nation's carriers had been involved in mergers.

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