Evening star., 1925-04-04
What's Ahead for Business?
No. 6-The Railroad Industry Seen by the
Van Sweringens.
BY John F. Sinclair.
Europe Hold Together? and Can Your Taxes Be Cut

operated railroads in the United
States, OF which each had a gross operat-
ing income of s1oo0,o0O or more a year.
Since then - roads have been merg-
ed into others. At the same time 25
smaller roads have been absorbed by
larger ones. The age of railroad
consultations seems to have arrived.
A new era has come since 1920.
The mergers so far are small COM
pared with that developed by the
Van Sweringen brothers of CleVe-
land during the past two years In
the organization of the new and en-
larged so-called Nickel Plate System.
Railroad mergers were once frown-
ed upon by the Government. But
not since 1920. Today they can be
effected In three ways. Two are pro-
vided for in the transportation act of
1920.
The first way is for one railroad to
lease or purchase the stock of other
railroads. But the law requires that
roads thus brought together must
maintain their separate corporate ex-
istence and operating organizations.
A complete working unit is impossi-
BILE. In spite of this, nearly all the
tentative mergers so far have taken
place under this plan; they are tenta-
tive because they must conform to
the plan of consolidation finally
adopted by the Interstate Commerce
Commission.
Second Method Provided.
The second method provided for in
the TRANSPORTATION act calls for a new
consolidated company for the two or
more railroads that are brought to-
gether. This is a difficult plan, for
the Interstate Commerce Commission
must not only declare such merger
is in the public interest, but must also
decide that the merger will be in har-
mony with the general plan of rail-
road groupings that the commission
is required by law to adopt and an
nounce to the people of the United
States. The commission has been
working for three years, but has not
made a final decision as to groupings.
Neither of these methods is definite;
they hinge on contingency In the
future. And so third plan of CON
solidation, outside the transporta-
ton act. was figured out by the Van
Sweringens.
Ten. wears ago these hard-working
bachelor brothers were interested in
Cleveland real estate, not. railroads.
They were developing a large resi-
Dental district. Better transporta-
tion facilities for this tract became
necessary. So, in July, 1915, they pur-
chased the old Nickel Plate railroad
from the New York Central for sS,-
100000. 1t was 523 miles long. Then
came the war. The railroads were
taken over by the Government and
this little line went with the rest.
But in 1920 the road was returned
to them Immediately they organized
a new railroad corporation under the
laws of several States to acquire and
operate the properties owned by sew
eral railroad companies. Then they
applied to the Interstate Commerce
Commission for authority to exchange
the capital stock of this new holding
company for the capital stock of the
companies merged The commission
approved, because the several State
laws permitting such consultations
were still in force and the commits
sion had no power to nullify any law
of any State. Thus new and enec-
tive plan for consolidation was dis
covered.
Gather In Other Ronds.
The Van Sweringens lost no time.
In March. 1922, the old Glover Lear
road and the Lake Erie and Western,
with a combined mileage of 1,175
miles, were merged with thhe Nickel
Plate. Six months later these two
men took over the controlling stock
interest in the Chesapeake and Ohio
through the purchase of the Hunting
ton stock. This, in turn, gave them
the control OF the Hooking Valley
railroad, an important coal road.
These roads added 2.ss6 miles more.
In the Summer Of 1924 the control of
the Erie and the Pere Marquette passed
to the Van Sweringens, who Immediately
proposed unified control and operation
fn- a wit
of the Nickel Plate and the Chesapeake
and Ohio"
Now the new Van Sweringen plan OF
unification and unified control embraces
9,145 miles, representing an investment
in road and equipment of s1,oS1, 100000
and a combined total net income of ap-
proximately s3o.o0o,000. The capital
items in the several roads have been re-
duced by about s100,000,000.
Thus, in two years, this new Nickel
Plate system emerges as one OF the first
10 railroad systems in America, and
with a combined net income equal to
more than SIS share available for the
common stock for the year ended June
80, 1924.
Four Great Systems Seen.
The Interstate Commerce Commission
had planned on eight, and possibly nine,
Eastern systems to serve in the terri
tories south of Boston to New York,
west to Chicago and southwest to ST.
Louis. 1t now looks as If four and not
nine systems would serve this territory.
These are the New York Central, Penn
sylvania, Baltimore and Ohio and Nickel
Plate.
The Van Sweringens consider that
balanced competition" is required by
the railroad industry and public interest.
To their way Of thinking Competition
between railroads, to be effective, must
be on something approximating an equal
basis; in other words, strong systems
competing with strong systems, not
weak roads pitted against powerful
ones"
They believe balanced competition
in the Eastern territory would re-
suit from the adoption of the pro-
posed four-system arrangement with
groupings based on naturally ire
lated and complementary lines For
instance, two of the roads, the New
York Central and the Nickel Plate,
would operate main lines as at pres
ent through the Buffalo gateway; the
other two. the Pennsylvania and the
Baltimore and Ohia, through the
Pittsburgh gateway. This would
maintain the natural traffic trends
and preserve existing main channels
to and from tidewater. Each system