The Penn Central Transportation Company, commonly abbreviated to Penn Central, was an American class I railroad that operated from 1968 to 1976. Penn Central combined three traditional corporate rivals (the Pennsylvania, New York Central and the New York, New Haven and Hartford railroads), each of which were united by large-scale service into the New York metropolitan area and to a lesser extent New England and Chicago.
Barely two years after its formation, the new company failed, representing the largest bankruptcy in U.S. history at the time. Penn Central's railroad assets were subsequently nationalized into Conrail along with those of other bankrupt northeastern railroads; its real estate and insurance holdings successfully reorganized into American Premier Underwriters.
History
thumb|"Public Interest Demands Merger", a 1962 publicity booklet produced by the Penn Central Merger Information Committee
Pre-merger
The Penn Central railroad system developed in response to challenges facing northeastern American railroads during the late 1960s. While railroads elsewhere in North America drew revenues from long-distance shipments of commodities such as coal, lumber, paper and iron ore, railroads in the densely populated northeast traditionally depended on a heterogeneous mix of services, including:
- Commuter/intercity passenger rail service
- Railway Express Agency freight service
- Break-bulk freight service via boxcars
- Consumer goods and perishables (produce and dairy products)
These labor-intensive, short-haul services proved vulnerable to competition from automobiles, buses, and trucks, a threat recently invigorated by the new limited-access highways authorized in the Federal-Aid Highway Act of 1956. At the same time, contemporary railroad regulation restricted the extent to which U.S. railroads could react to the new market conditions. Changes to passenger fares and freight shipment rates required approval from the capricious Interstate Commerce Commission (ICC), as did mergers or abandonment of lines.
The situation was particularly acute for the Pennsylvania (PRR) and New York Central (NYC) railroads. Both had extensive physical plants dedicated to their passenger custom. As that revenue stream faded following WWII, neither could slim their assets fast enough to earn a substantial profit (although the NYC came much closer). outside the Interstate Commerce Commission Hearing Room in Washington, D.C. about employee job security.]]
In 1957, the two proposed a merger, despite severe organizational and regulatory hurdles. if neither the N&W and C&O would buy the Lehigh Valley Railroad (LV), then that railroad would also be required to be incorporated. Ultimately, only the New Haven successfully joined the Penn Central; the conglomerate failed before it could incorporate the latter two.
Almost immediately after the transaction cleared, the organizational headwinds presaged during the merger negotiations began to overwhelm the new corporation's management. As ex-PRR managers began to secure the plum jobs, the forward-thinking ex-NYC managers departed for greener pastures. Although both PRR and NYC had been profitable pre-merger, A large portion of the savings that year came from writing off the entire passenger department, along with some associated depreciation costs at a total value of $130.5 million. The real financial state of the railroad was hidden to such an extent that not even Saunders knew how bad it really was.]]
By early 1970, PC's financial condition had deteriorated significantly. Commercial banks had largely ceased extending credit, while approximately $150 million in outstanding debt matured that year. The railroad reported a loss exceeding $100 million in the first quarter of 1970.
At the time of its filing, PC was the sixth-largest corporation in the United States. The bankruptcy constituted the largest corporate insolvency in U.S. history until Texaco in 1987. Railroad historian George H. Drury described the event as "cataclysmic", including main lines and branch routes. The storm contributed to the collapse of other northeastern railroads. By the mid-1970s, few carriers remained solvent in the region east of Rochester and Pittsburgh, north of Philadelphia, and southwest of the Maine and New Hampshire border.
During this period, PC partnered with the U.S. Department of Transportation to test experimental passenger technologies on what would become the Northeast Corridor. The railroad continued operating PRR's Metroliner service between New York City and Washington, D.C., and introduced the United Aircraft TurboTrain between New York and Boston. These efforts failed to produce sustained improvements, primarily due to degraded track conditions and unreliable schedules. In response, the Nixon administration established Amtrak in 1971 to relieve railroads of their passenger service obligations.
By 1974, PC's physical infrastructure had deteriorated severely. Deferred maintenance and hurricane-related damage contributed to a significant increase in derailments, including 649 in a single month. The Cleveland hump yard reported an average of six derailments per day. Around this time there were alleged incidents of "standing derailments", in which rotted crossties would snap under the weight of an unmoving car. A 1973 inspection by the Federal Railroad Administration concluded that the railroad would need to cease operations soon if the situation did not improve.
Despite federal intervention, freight railroads continued to lose market share to the trucking industry. Industry leaders and labor unions advocated for deregulation. The Staggers Rail Act of 1980 reduced federal oversight and enabled Conrail to implement route consolidations and productivity improvements. Former PC trackage that lacked economic viability was abandoned or repurposed for interim recreational rail trails. In 1987, following a return to profitability, Conrail stock was publicly offered. The company operated as a private entity until its acquisition and division by Norfolk Southern Railway and CSX Transportation in 1999. It became part of Carl Lindner's Cincinnati financial empire American Financial Group.
Grand Central Terminal
thumb|[[Main Concourse of Grand Central Terminal. The terminal was owned by Penn Central and its corporate successor until purchased by the MTA in 2018.]]
Until late 2006, American Financial Group still owned Grand Central Terminal, though all railroad operations were managed by the Metropolitan Transportation Authority (MTA). The U.S. Surface Transportation Board approved the sale of several of American Financial Group's remaining railroad assets to Midtown TDR Ventures LLC, an investment group controlled by Argent Ventures, The MTA paid $2.4 million annually in rent in 2007 and had an option to buy the station and tracks in 2017, although Argent could extend the date another 15 years to 2032. The assets included the of rail used by the Hudson and Harlem Lines, and Grand Central Terminal, as well as unused development rights above the tracks in Midtown Manhattan. The platforms and yards extend for several blocks north of the terminal building under numerous streets and existing buildings leasing air rights, including the MetLife Building and Waldorf-Astoria Hotel. The MTA's finance committee approved the proposed purchase on November 13, 2018, and the purchase was approved by the full board two days later. The deal finally closed in March 2020, with the MTA taking ownership of the terminal and rail lines.
Heritage
Few railroad historians and former employees view the mega-railroad's brief existence favorably, and the company has little presence in the railroad enthusiast press.
As part of Norfolk Southern Railway's 30th anniversary, the railroad painted 20 new locomotives utilizing former liveries of predecessor railroads. Unit number 1073, a SD70ACe, is painted in a Penn Central Heritage scheme.
As part of the 40th anniversary of the Metro-North Railroad, four locomotives were painted in a different heritage scheme to honor a predecessor railroad. Locomotive 217 was painted in the Penn Central Blue and Yellow scheme.
Notable Officers
{| class="wikitable"
|+
!Name
!Position
!From
!To
|-
|Stuart T. Saunders
|CEO, Chairman
|Feb 1, 1968
|Jun 8, 1970
|-
| rowspan="2" |Alfred E. Perlman
|President
|Feb 1, 1968
|Nov 30, 1969
|-
|Vice Chairman
|Nov 30, 1969
|Jun 8, 1970
|-
|David C. Bevan
|CFO
|Feb 1, 1968
|Jun 8, 1970
|-
|Paul A. Gorman
|President
|Dec 1, 1969
|Aug 11, 1970
|-
|William H. Moore
|President
|Sep 1, 1970
|Jan 4, 1974
|-
| rowspan="2" |Jervis Langdon Jr.
|Trustee
|Jul 22, 1970
|Jan 11, 1974
|-
|President
|Jan 11, 1974
|Apr 1, 1976
|-
|Robert W. Blanchette
|Trustee
|Jan 11, 1974
|Oct 24, 1978
|-
|W. Willard Wirtz
|Trustee
|Jul 22, 1970
|Dec 28, 1974
|-
|George P. Baker
|Trustee
|Jul 22, 1970
|Jun 18, 1974
|-
|John H. McArthur
|Trustee
|Jun 18, 1974
|Oct 24, 1978
|-
|Richard C. Bond
|Trustee
|Jul 22, 1970
|Oct 24, 1978
|}
See also
- History of rail transport in the United States
- Penn Central Transportation Co. v. New York City (1978 Supreme Court case)
References
Further reading
External links
<!--source for states: map in January 2002 Trains magazine-->