Railroad Mergers

Report Outline
New Wave of Rail Consolidation Plans
Railroad Consolidation and the I.C.C.
Benefits in Merging of Rail Carriers

New Wave of Rail Consolidation Plans

Acceleration of Railroad Merger Movement

American railroads, harder pressed than ever by the competition of highway, air and water carriers, are showing unprecedented interest in the possibility of bettering their condition by reducing competition among themselves. Some two dozen Class I carriers, operating more than half the railroad mileage in the country, have projected or are studying plans to combine into larger, stronger, and more viable systems.

Merger or consolidation of railroads has been common in American transportation history. In fact, most of today's rail systems were built up by joining together numerous short-line roads. The Association of American Railroads pointed out, July 29, that at one time there were as many as 6,000 railroads in the United States. by the turn of the century the number had been reduced to 1,224, and today it is down to around 410 so-called line-haul carriers operating 218,000 miles of road. But despite the drop in total number of rail carriers, there has been little change for decades in the number of major railroads. There was considerable discussion in the 1920s of the need for rail mergers, but few actual mergers followed. Only two years ago, on June 3, 1958, a report on railroad problems by the Senate Committee on Interstate and Foreign Commerce observed that “The railroad industry has not … been sufficiently interested in self-help in such matters as consolidations and mergers.”

Total operating revenues of $9.8 billion last year gave the Class I railroads net railway operating income of only $749 million, which was lower than in any year since 1949. The steady decline in net railway operating income since 1955 has been an important factor in spurring interest in economies to be gained through consolidations. The growing merger movement was given definite encouragement last October, when the Interstate Commerce Commission approved union of the Norfolk & Western and the Virginian Railway. The climate for such proposals was further improved, March 30, when a plan for consolidation of the Erie and the Delaware, Lackawanna & Western received the preliminary approval of an I.C.C. examiner.