Evening star., 1938-06-26
How to Stabilize All Transport
Rises Above Acute Rail Issue
Conference Opening at Chicago Between Labor
and Systems Emphasizes Plight Into Which
Carriers Have Been Allowed to Drift.

| ruptcy Act of 1888, just one reorganization
has been approved by the Interstate Com.
| merce Commission, and that was done
this past week. when the case Of the Spo-
kane International Railway Co. and Cour
d'Alene and Pend d'Oreille Railway Co.
was disposed Of and sent forward to the
United States Court Of the Eastern District
of Washington for final action.
Too, the question Of just how much
wringing Is justified Is very pertinent.
Railroads have outstanding approximately
| $4,000, 100000 in stock and $4,000, ,000, 900
in bonds; their book assets run above $24,-
500 100000
This very point was discussed at length
by Joseph B. Eastman. liberal member Of
the Interstate Commerce Commission, in
an address before the Harvard Business
School Alumni Association earlier this
month.
Debt Normal in Business.
1T seems to be assumed" he said, at
least by many who offer this prescription.
that the debt constitutes an unjust burden
from which the country ought in fairness
to be relieved. The fact is, that debt is =
normal incident of any business, as well as
of the Government Of the United States.
For many reasons, it is true that the rail-
roads, or many of them. have debt of pro-
portions too large for safety in conditions
of great financial stress such as they are
now experiencing. On the other hand, if
they were able to earn anything like the
return which the Constitution gives them
the right to earn If they can they would
have no dif1culty with the debt
Certainly many Of the railroads must
be reorganized. in view Of the conditions
which have arisen, but 1t is no simple Job
to do this with proper regard to the equities
as between the bondholders and stockhold-
ers and various classes of each, and the
difficulty has been raised to something like
the nth degree by present instability Of
earnings"
Also, when it is recalled that in Febru-
ary of this year revenues fell so low that
the railroads failed by more than s., 1000 900
to make enough to cover operating ex-
penses and taxes-and this is before a dime
is set aside for fixed charges-the futility
OF talking "wringing" to the exclusion Of
everything else is readily apparent.
Twinned up with reorganization is always
the advocacy Of coordination and consoli-
dation, which in the long run will add up to
about the same thing. Eventually, it seems
certain, wide application of this principle
f9 inevit a hlA ha,% AU~ s,S ~HHA~> 49,. ,.>.A,..,
difficulties to be surmounted and clashing
interests whose reconciliation would chal-
lenge Solomon.
Such Program Long Advocated.
Such program, in the interest of
strengthening the rail structure as whole
and for providing more economic operation,
has been advocated in one form or another
ever since the railroads came out from un-
der Government control, after the World
War. The obstacles in the way of any con-
solidation, whether big or little, are per-
fectly illustrated in the case of the Minne-
apolis st. Louis Railroad Co., whose pro-
posed dismemberment was blocked by the
Interstate Commerce Commission few
days ago.
This road traverses the Midwestern farm
belt. and has been in bankruptcy is years,
victim OF the motor age. The plan before
the commission entailed its acquisition by
the Associated Railways Co., composed of
seven lines: the abandonment of certain
trackage in Iowa, Minnesota and South
Dakota; the termination of service over
joint tracks with other roads in Illinois,
and continued operation Of about three
fourths of it.
The proposed purchasers were the Chi
cago l. Northwestern, the Chicago, Nil.
waukee, st. Paul & Pacific and the Chicago,
Rock Island L Pacific, all Of which are op-
Grating under trusteeships, and the Chi
cago, Burlington Quincy, Great Northern,
Illinois Central and Minneapolis St. Paul q
Sault Ste Marie.
The idea was to eliminate one weak line
and strengthen, correspondingly, the
others. But protests flooded in from every
body having a conceivable interest in the
proposal, and the I. c. c. was equally as
firm in opposition.
The commission conceded that the roads
involved might be aided, but pointed out
that communities, whose population
totaled nearly 5000, would be deprived
of rail service; small industries would be
hurt; some rate increases would result:
about 1000 workers would be thrown out
of employment, and that holders of Junior
securities might not be amply protected.
And that is the case as it stands TODAY
Roads Have Voiced Objections.
The railroads have not taken their lick
ing lying down. offering improvements in
passenger and freight service undreamed Of
few years ago. There has, however, been
bad lag in maintenance and equipment
purchases, and right here is where the
railroad issue comes home, for heavy goods
industries suffer when rail buying falls of.
It Is impossible to take hundreds Of thou.
sands Of dollars out Of the market annually
and not slow up production materially in
many lines
There has been tendency in some quar-
ters to blame the Interstate Commerce
Commission for denying the blanket Is
per cent freight rate increase the carriers
sought earlier this year, and holding them
to somewhere around or 7, but when
system geared to handle 1000, 900 cars
Of freight week is getting but half that
much. higher rates certainly are not the