The Great Railroad Revolution (62 page)

Amtrak did not always live up to its first slogan, “We're making the trains worth traveling again.” In the early days, its trains were run in all kinds of random liveries and in such a poor condition that at one point in the mid-1970s, “these rolling junk boxes were catching fire at the rate of one a day.”
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And in its efforts to be trendy, Amtrak made embarrassing mistakes, such as outfitting its female employees in hot pants. In the good times, such as the mid-1980s when airlines were doing badly or angering their passengers with lousy service and the economy was booming, it attracted extra passengers, but the complicated nature of railroad economics and the parsimony of the federal government toward Amtrak meant it could never respond adequately by putting on supplementary services or buying additional coaches. That is summed up by a bald statistic: the total government subsidy to Amtrak since its creation in 1971 amounts to less than one year's federal funding for the highways.

Amtrak's hopes of achieving profitability in the early days were made even less likely because of the age and condition of the equipment it inherited. Those lovely passenger cars introduced twenty or thirty years previously to carry passengers across the prairies and mountains of the West or down to Florida were now riddled with rust. The subsidies were nowhere near enough to cover operating expenses, let alone the need for new investment, but then salvation came in the form of a crisis, the oil-price hikes of
the mid-1970s. Higher fuel prices pushed up the numbers traveling by train, and the Nixon administration was forced to increase Amtrak's subsidy to $650 million per year. By 2011, that had risen to $1.4 billion (though in real terms this represented a cut, since in 1971 money it was worth around $460 million). This is the result of the regular crises that, over the years, have on several occasions pushed Amtrak to the brink of collapse, usually during the administrations of Republican presidents elected on the basis that they would cut back its subsidies. In the event, like a damsel rescued from a burning castle, Amtrak is plucked to safety at the last moment with emergency funding but never any recognition of its long-term needs. Hence, cost cutting, paring back, reducing the number of trains, and scrimping on services such as meals have been the order of the day throughout its forty-year history. As a result, Amtrak has been dogged by tales of poor performance and service all through its history, though on some lines it has earned plaudits for its trains. Every time Amtrak needs new rolling stock, or wants to boost services, the federal government has stalled and tried to avoid putting in extra money. But then often it has relented, thanks to lobbying and the lack of an alternative. Amtrak has, too, to its credit, played a major role in saving and refurbishing some of the remarkable stations it inherited, such as Boston's South Station and Union Station in Washington, DC.

By the 1990s, Amtrak had been allowed to buy new coaches and even acquired a few sections of track in the Northeast corridor and Michigan, making it far easier to operate on those sections. However, hamstrung by federal control, the lack of funds for investment, and the harsh economics of the railroad, Amtrak has always been something of a Cinderella service. As an article in
Trains
magazine on Amtrak's fortieth anniversary suggested, “Despite oil price spikes in 2008 and 2011, sustained reliable funding for Amtrak seems as elusive as ever.”
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The problem is that Amtrak is not really a national rail service in the European sense and provides a regular and frequent service only in the Northeast corridor, in California (where passenger numbers have increased dramatically), and between a few city pairs such as Chicago–Milwaukee and Chicago–St Louis. Elsewhere, with frequencies of one train per day or even just three per week, it is more akin to a rail-tour company than a conventional regular rail service. Indeed, some of those places may well just have a
train at 4:00 a.m. in the morning, hardly conducive to attracting a high level of customers. Travel on these long-distance trains, some of which take more than two days to reach their destinations, is invariably more expensive than flying and therefore attracts only a limited market of older people with time on their hands and those who dislike taking to the air. The trains, too, run to far more lax schedules than the services they replaced, even though they often retain the traditional names like Sunset Limited and California Zephyr. The meal service offers fairly basic American food, served with none of the panache of the famous old prestige trains.

Amtrak's original remit excluded commuter services. Here too, though, government help was on the way, as in the 1970s several states recognized the need to subsidize these lines. In addition to New York's ownership of the Long Island Rail Road, the States of New Jersey, Massachusetts, and Pennsylvania also began to support their local services. In 1982, the law was changed to allow Amtrak to operate commuter services as a contractor on behalf of local transit authorities, and although it has recently lost some contracts to private operators, it still runs local services in several states.

With passenger rail services saved (sort of), the crisis for the freight railroads had to be addressed. Whereas the collapse in the passenger business was understandable given the advent of the car and the airplane, the losses mounting up in the railroads' freight business, the mainstay of their business for most of their history, were both less comprehensible and more threatening to their very survival. There was, indeed, a period in the 1970s when it was conceivable that the railroad business might have disappeared completely in America, apart perhaps from a handful of lines carrying coal or other minerals.

This crisis was the result of the harsh realities of railroad economics in the face of competition, but also because of errors made by railroad bosses and the failure of the regulator to realize that times had changed. The railroads lost whole chunks of their freight business in the decades after the Second World War. Virtually every category of freight was declining. Gasoline had gone over to pipelines, and livestock fared better in trucks, where it could be better looked after. According to Saunders, “While fresh vegetable was holding up, fresh fruit especially from Florida, was moving by truck—45 per cent in 1950, 72 per cent in 1963. Finished manufactured
goods were shifting to trucks because of faster door-to-door service and gentler handling.”
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The main response by the railroads was to moan, leading to this period being dubbed, rather unfairly since many of their complaints were valid, the “Crying Towel Years.” They would argue that the odds were stacked against them by the government and all the factors outlined above and that they were unfairly treated. Their response was to cut back on services, close lines, and hope that sufficient savings could be made. They never were. The railroads started first to lose, then to hemorrhage, money. However, despite these losses, there was still a paradox. As Saunders suggests, “Freight transportation by rail in the 1970s was not like the horse and buggy,” a technology that had had its day and could be superseded. Railroads, he contended, “were still the assembly line that connected a diverse, specialized, inter dependent economy, and they were troubled—and no one knew what to do about it.”
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While the railroads were indeed losing various types of business, overall not only were they carrying more freight than ever before, but they were also becoming more efficient. They were cutting out loss-making mileage—with half the nation's network being closed between 1930 and 1980—and were gradually eating away at the labor practices that were so costly to them.

The constraints imposed on the railroads by overbearing regulation were highlighted by a prolonged fight between Southern Railway and the Interstate Commerce Commission over freight rates, known as the “Big John” case. In the early 1960s, the Southern invested millions of dollars on its track to enable it to support far bigger grain hoppers than previously. Rather than the twenty-five-ton limit of its old boxcars, its new “Big John” hoppers could hold one hundred tons each and were far easier to unload. Using them, the rate to carry grain between St. Louis and Gainesville, Georgia, fell from $10.50 per ton to less than $4.00, transforming the economy of cattle raising in the South: “For the first time, cattle in large numbers could be raised and fattened on cheap western grain in the mild climate of the South,” demonstrating yet again the ability of the railroad to open new markets.
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Indeed, food prices for many people would fall as a result. However, the commission did not like the arrangement, because rival Granger railroads that did not have the new equipment would be put out of business. Everyone was against the plan: the truckers who were undercut, the owners of barges still used on
government-owned inland waterways, and of course the rival railroads. Far from complimenting the Southern on offering cheaper rates, the ICC refused to sanction them, and it took three rounds of court cases, and several years' battle, before, at last, in 1965, the way was cleared for the reductions. It was a landmark decision that paved the way for later deregulation.

The railroads also realized that consolidation and mergers would reduce costs and make them more efficient. The Chesapeake & Ohio, one of the more innovative big railroads, acquired both the Baltimore & Ohio and the Western Maryland in the early 1960s, while the Norfolk Western took on, among others, the Virginian and the Nickel Plate & Wabash, and eventually merged with the Southern in 1982. These mergers improved the financial position of the railroads concerned, but the industry as a whole was in a parlous state, not least because it was still constrained by regulation while facing unprecedented competition. Consequently, the decade of the 1970s was a time of great trauma for the industry and for the politicians who sought to find a solution that did not result in their closure but that, at the same time, did not cost the government huge amounts of money. Despite this being a period before environmentalism became fashionable, there was an awareness that closure of the railroads would have put an intolerable burden on the nation's highway system, since one train can take as many as 280 trucks off the road. The freight railroads therefore stuttered into the 1970s with no solution in sight, but it soon became obvious that the industry needed a complete overhaul if it was going to survive. The crisis came to a head in 1973 when, despite the freight railroads carrying more tonnage than ever before, several were already bankrupt or on the point of collapse. Penn Central, being run by a judge, threatened to stop all operations if it did not receive government aid by October 1. Yet, given the oil crisis, the railroads, which routinely use less than a quarter the amount of oil per ton mile than trucks, were proving their worth, while being unable to make a profit. The various bankrupt railroads were being kept solvent by temporary loans from the federal government, but the situation could not last. Numerous ideas were tossed into the debate, ranging from paring back the railroads to a small profitable rump—always the nirvana of governments restructuring railroads, but equally always unattainable, as each branch that is cut off reduces the carryings on the so-called profitable core—to creating a large
public-sector national railroad company, a kind of American British Railways. This was far too socialistic for Nixon, or indeed Congress, who both desperately wanted a private-sector solution.

Inevitably, there was a compromise, and under the Regional Rail Reorganization Act of 1973 a huge conglomerate of seven bankrupt railroads, centered around the Penn Central and including the Erie, the Lackawanna, and the Lehigh Valley, was formed to maintain freight services in the key Northeast region. Called Conrail, at first it lost billions of dollars, and it needed another crucial legislative change to save American freight, the Staggers Act, named after its promoter, Harley Staggers, the Democratic congressman who steered it through Congress in 1980. The act finally deregulated the rail industry, repealing the legislation that had created the Interstate Commerce Commission nearly a century previously. It was fifty years too late, but was passed just in time to save the industry from collapse. At last, the railroads could set their own rates for carriage, which meant they could ensure that they were high enough to allow them to invest in improvements and earn their shareholders a reasonable rate of return. The carriage of coal, grain, cars, and intermodal containers—which could be used on both trucks and trains—grew rapidly, as the railroads were able to offer flexible and more attractive rates. The railroads were also allowed to close lines without seeking permission, which meant they could mothball unprofitable routes. The results were immediate. In 1981 Conrail made a small profit, and other railroads set about rationalizing their operations. Labor was shed, but the remaining workers were still well paid and unionized. Within ten years, the industry's costs had been halved, and most railroads were well on the road to regular profitability. There were hiccups on the way, however. Union Pacific, for example, suffered a Penn Central–style meltdown in 1997 when its merger with Southern Pacific proved to be an administrative nightmare. All the same, scenes that had attended the Penn Central debacle were reenacted, this time around Houston, its hub, with traffic getting lost, trains being held for days, desperate shippers searching for their railcars, and the company share price plummeting. It took two years to sort out and became so renowned as an example of incompetent management that it was even used as a joke on
The Simpsons
.

The measure of the turnaround in the industry can be gauged by the fact that in 1986, Conrail was privatized in what was the biggest-ever share
placing in Wall Street history, worth $1.65 billion. From the sale of Conrail, which was later broken up largely into its old Pennsylvania and New York Central components and sold to Norfolk Southern and CSX, respectively, and a series of mergers, the industry sorted itself out into seven huge railroads, two of which are Canadian, called Class I and defined as having a turnover in excess of around $400 million; around thirty regional companies; and more than five hundred “mom-and-pop” railroads, short lines mostly serving one customer and feeding into the network, some of which are owned by bigger corporations. Although closures continue, there have been reopenings too, and overall more than a third of American rail mile-age has survived, with 94,000 miles in use, more than eight times the size of the whole of the UK's system. The railroads carry an impressive 40 percent of American freight, measured in ton miles, a far higher percentage than in any other country. They have recovered enough to again be called the backbone of the nation's infrastructure, unheralded by the vast majority of Americans and for the most part invisible to them because of the lack of a truly national passenger rail network. People remember the passenger trains that they, or their parents, traveled on, but they do not see today's flourishing industry, since so many stations have now long since disappeared. The railroads are so invisible that to counter this in Seattle, a little viewing platform has been built where the Union Pacific and Burlington lines cross so that parents can take their children to look at the “choo-choos,” which, of course, are almost all freight trains.
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