Evening star., 1943-01-01
All Records Broken
By Heavy Traffic
In, Railroads
improved Earnings Lift
Bankruptcy Threat
For Many Lines
BY Cambridge Associa tes.

By Cambridge Associates.
In 1888 the Nations railroads
were well on the way to financial
soundness after q devastating four
years and their stocks skyrocketed-
but only for while. In 1887 i'm
proved traflic levels brought buy
ing surge into the railroad bond
market-but the slump Of 1885
brought disillusionment.
In 1912 traffic levels surpassed the
best In history, but this time in
vestors decided that they were not
going to be fooled. Neither stocks
nor bonds responded very i'm
pressively to some Of the best op-
Grating figures in 20 years. Yet
1943 bids fair to remove the threat
Of bankruptcy from most Of the still
solvent section of the industry and
pave the way for many successful
reorganizatiops.
Even II the war should end early
In the year, 1t Is hardly likely that
the railroad business would suffer,
since the Nations industries have
been physically dislocated to such
an extent that the mere process of
shifting back to peacetime pursuits
ID gargantuan task. And for every
month that the war continues its
magnitude is greater. Furthermore
there will be a pentup demand for
goods Of all descriptions from con-
sumers who will have the cash to
satisfy their needs.
Costs Under Control.
Wages have always been the chief
problem Of the railroads, totaling
over 90 per cent OF operating costs.
For the duration wage demands will
be considered more from the stand
point OF public policy than Of the
ability OF the carriers to pay.
And 1t is likely that wage and
price controls will outlast the war
by . considerable period because
Of the inf1ationary potential.
The pressure for recovery Of scrap
metal has made it imperative that
many miles OF improbable lines
be abandoned.
The 1942 tax bill allowed pur-
chases OF bonds for retirement with
out penalty on the profit" be-
tween cost and par value, and
allowed the postwar rebate Of 10
per cent Of excess profits taxes to
be claimed Immediately for bond
retirements.
In this period of prosperity there
has been very little disposition on
the part OF railroad managements
to be liberal in the matter OF divi-
uends and the result has been a
large increase in the cash balances
Of most transportation units, as well
as the retirement of both floating
and fixed debt.
Maintenance of roadbed and re-
placement of equipment has been
only fair, but this kind of work
is now getting higher priorities.
On the whole 1943 promises to
bring the industry nearer to re-
spectability in financial circles than
for many years.
Postwar Outlook Good.
It is perhaps too early to be look
ing forward to the time when hos
Titles have ceased and we are all
trying to bring order out OF chaos.
1t is safe to say. however, that
truck competition will be no more
serious a threat to the railroads
than 1t has been In the last few
years. Competition from water
routes may be an important factor,
but in all likelihood 1t will be
more than Offset by increased over
land shipments to coast ports for
export.
As for cargo airliners, costs are
now about 10 times rail Transports
ton costs and will remain high
because Of the expensiveness Of the
equipment and the high fuel con-
sumption.
Objectively considered, the rail-
road problems of the future can
hardly be rated as weighty as those
OF the decade Just past. Maybe the
investing public will come to realize
fhie II, 1oAo