Evening star., 1932-05-31

HtS 10 tftc just tUO StO tcS OH LHc
railroad situation.
BY J. A. FOX.
The railroads are not headed for the
economic boneyard. To the contrary,
when general conditions right them
selves, they will be in the van Of in
dustrial comebacks.
This Is the view Of Edward Grant
Buckland, chairman of the board of the
New York, New Haven and Hartford
railroad, at present SORT Of physician
in-chief to the aiung rail lines in his
capacity as president Of the Railroad
Credit Corporation.
Strict Economies Enforced.
For serveral years, says Mr. Buckland
the railroads had been making a thor
ough study Of various economies
When the slump hit oil business these
efforts were intensified, with the result
that the roads today are just about on
rock bottom in operating expenses.
1t is true that they are bedeviled by
busses and trucks. pipelines, waterways
airplanes and private automobiles. and
that the major part OF this competition
tory measures finally may be adopted
But when things get right in this
country again." Mr.. Buckland observes
you're going to see railroad revenues
bound upward"
There is nothing Of the Pollyanna
about this rail head, who tended cattle
to finance his education, taught law at
Yale for nine years after winning his
own LIB. there. and then got q humble
start in the legal department of the
New Haven.
He has seen the New Haven through
dark days, for after the Federal Control
period its financial statements we're
principally in red ink To-day Mr..
Buckland says, the New Haven oc-
cupies 4 fairly satisfactory status 1t
has no large maturities before 1910, and
its operating ratie-expenses exclusive
Of fixed charges and taxes-is about 81
per cent OF revenues. For none of this
does Mr.. Buckland take credit recalling
rather the administrations Of e. j. Pear
son, late president of the road, and
John j. Pelley, president now.
Popular Choice.
But the heads OF all the great rail-
roads decided that Mr.. Buckland was
the man they wanted TO head the Rail-
road Credit Corporation, the agency set
up by the carriers to administer the
fund built from excess freight charges
allowed by the Interstate Commerce
Commission TO enabls needy roads to
meet their fixed interest obligations
When some Of these fellows come
around for money" says Mr.. Buckland,
referring to applications to the credit
cooperation, II tell them, Man, Ger
tainly know how you feel for I recall
one instance where We had to borrow
about a million dollars from the Gov
ernment to pay interest on meney al
ready due the Government"
Discussing current needs OF the rail-
roads, Mr., Buckland estimated that
their borrowings this year must approx
mate s459 100000. according to the pres
ent trend Of operating income.
This is divided as follows: s900o0,0 900
for maturing bends and equipment trust
notes, $l29,003 900 for bank and other
loans, s96,o00,0o0 for interest charges,
$4,000, 600 for capital expenditures and
s65, ,oO00o0 in other obligations.
The Railroad Credit Corporation fund
is not expected to yield more than $50
000,0 ,00o leaving the remainder to be
handled by the Government Recon-
struction Finance Corporation and pri-
vate financing, principally the former.
II the Interstate Commerce Commission.
and the Reconstruction Finance Cor
poration, on wh-se l-ans it passes.
adhere to their present general policy
Of requiring banks to carry half of the
loans outstanding to railroads, this will
mean that they must defer collection of
about S65 ,000,00 due this year.
s164, 4,60s,5l3 Advanced.
Banks will take care cf some of the
new financing but the burden will fall
on the Reconstruction Finance Corpora
ton, from which, up to May 81. Sc
of Government funds.
The Railroad Credit Corporation has
not been abe to do as much as expected
but, as Mr. Buckland says, the cause is
traceable to the further decline in rev
enueS not anticipated when the orgari-
zation was projected.
When the carriers went before the
Interstate Commerce Commission last
June they asked horizontal freight
rate increase of Is per cent, which it
was estimated, would produce about
$400,000000 annually. They eT pha-
sized that their credit was imreried by
falling receipts, and that this would be
reflected in insurance companies and
financial organizations holding their
securities; necessary expenditures also
were being held up, it was pointed out.
The commission held that such an
increase would, in the not distant
future, harm, rather than help the
railroads" from competitive stand
point, and that 1t would put rates
upon many kinds of trafic above
just and reasonable level" The com
mission further contended that loss OF
passenger traffic was the principal
cause of the troubles OF the rail lines.
and that this trafic was class OF
business on which the rates could not
be boosted.
Increases Allowed.
So In conformity with its views, the
commission allowed increases on GER
tain commodities it thought could bear
them, and said that, with certain other
pending rate adjustments, these raises,
to be effective from January OF the
present year through March 81, next,
should produce from $l00,000,0O0 to
$l25, 900, 900 revenue, enough to meet
fixed charges and leave q surplus,
which, according to the carriers figures
Of their needs, would be about $40,-
100000, at minimum.
The commission obviously had in
tended that these emergency increases
should be pooled and given outright to
the needy carriers, but the roads pro-
tested that they had no right to give
away revenues, and that advances to
weak lines, accruing from services by
the strong could be made only in the
form Of loans. This point was carried,
and the formation of the Railroad
Credit Corporation to handle this phase
OF financing was the result.
The new rates went into effect
January 4, and just how far sskew
were all estimates as to probable reve-
nues-based on then current trends
is shown by the receipts a fraction
over $l5,000,ooo for the first three
months.