Condition of the Railroads

Report Outline
Railroads' Declining Role in Transport System
Controversy on Reasons for Railroad Troubles
Self-Help by Railroads Through Modernization
Government Aid to Solve Problems
Special Focus

Railroads' Declining Role in Transport System

Sharp declines in prices of leading railroad stocks in December—declines which carried the Dow-Jones rail average down to the lowest point touched since January 1954—reflected the weakening confidence of the investment world in the future of the American railroad industry. Rising costs, losses in freight and passenger traffic, and falling rail earnings had prompted the Senate Commerce Committee a month earlier to order hearings on what Chairman Warren Magnuson (D-Wash.) called “the deteriorating railroad situation.”

The Senate hearings, scheduled to open Jan. 13, will be conducted by a subcommittee headed by Sen. George Smathers (D-Fla.). Smathers has staked out three broad areas for study: (1) Steps that can be taken by the railroads themselves to improve their condition; (2) desirable changes in policies of the Interstate Commerce Commission under present regulatory laws; (3) new legislation needed to assure “a sound railroad industry.” A delegation of rail officials which visited the White House on Dec. 5 was reported to have asked administration support for tax, regulatory and there emergency relief at the 1958 session of Congress. Meanwhile, the major railroads have cited their “precarious position” in an appeal to the I.C.C. for approval of freight rate increases under a speed-up process that would put them into effect on Feb. 1.

Failure of Rails to Shake in Postwar Prosperity

“Most railroads,” said a business leader quoted by Business Week (July 13, 1957), “are suffering from dinosaur-ism. They're huge, slow-moving, and hard put to change with the times.” While rail executives would doubtless consider this an overstatement, the fact remains that their industry is confronted with a serious problem of adjustment. Soon after the rail lines were built, they began to achieve a near monopoly of intercity freight and passenger business. Despite the fact that railroads have not had a practical monopoly on transportation for more than 30 years, much of the old mold of operating procedures, management thinking, and public regulation remains unchanged.