page_title: Penn Central Transportation Company
section_title: Merger begins
hierarchical_section_title: Penn Central Transportation Company / History / Merger begins
caption_attribution_description: English: Penn Central sheet metal worker A. A. Muhlbauer of Samuel Rea Shops in Hollidaysburg, Penn. uses hydraulic riveter to affix cap to cover seam of boxcar's roof sheets in the railroad's 1970 campaign to construct new cars to improve business.
context_page_description: The Penn Central Transportation Company, commonly abbreviated to Penn Central, was an American railroad name that was used at the Class I railroad level from 1968 until 1976. The railroad system that applied the Penn Central name was a combination of railroad systems from three railroads: the Pennsylvania Railroad, New York Central Railroad and the New York, New Haven and Hartford Railroad. The railroad system started off as a combination of the PRR and New York Central systems first as the system began as a merger between the PRR and the New York Central in 1968, the New York, New Haven and Hartford was added in 1969.
  The legal entity that eventually became the Penn Central Transportation Company was the former Pennsylvania Railroad, which absorbed the New York Central as part of the 1968 merger and at the same time began using the Penn Central name to reflect the merger with the New York Central. The company remained headquartered in Philadelphia after its merger with the New York Central. By 1970, the company had filed for what was, at that time, the largest bankruptcy in U.S. history.
context_section_description: The merger–legally, an acquisition of the New York Central by the PRR–formally closed on February 1, 1968. The Pennsylvania Railroad, the nominal survivor of the merger, changed its name to Pennsylvania New York Central Transportation Company, and began using the name "Penn Central" as a trade name soon after. The former Pennsylvania Railroad shortened its name to Penn Central Company on May 8, 1968.
  The ICC approved the merger on the following conditions:
  The new company had to take over the freight and passenger operations of the New York, New Haven & Hartford Railroad (NH). That occurred on December 31, 1968.
  PC had to absorb the New York, Susquehanna & Western Railway (NYS&W). PC and NYS&W could not agree on a price, and eventually NYS&W became part of the Delaware Otsego System.
  PC had to make the Lehigh Valley Railroad (LV) available for merger by either N&W or C&O or, if neither of those railroads wanted it, merge it into PC. LV struggled along on its own and entered bankruptcy only three days after PC did.
  The merger was not a success. An implementation plan was drawn up, but not carried out. Attempts to integrate operations, personnel and equipment were unsuccessful, due to clashing corporate cultures, incompatible computer systems and union contracts. Little thought had been given to unifying the two railroads, which had dramatically different styles of operation. In the decade prior to the merger, the NYC had trimmed its physical plant and assembled a young, eager management group under the leadership of Alfred E. Perlman. The PRR, headed by Stuart T. Saunders, had been a more conservative and traditional operation. Many of NYC's management people (known as the "green team") saw that the PRR (the "red team") was dominant in PC management and soon left for other positions. Those who departed had often said the different corporate philosophies (PRR branded itself as a transportation company, while the NYC considered itself a railroad company) could never have merged successfully. The network was so poorly integrated that trains were lost on a regular basis; PC classification clerks struggled to properly dispatch cars across PC's entangled routing system.
  In addition to the problems of unification, the industrial states of the Northeast and Midwest were fast becoming the Rust Belt. As industries shut down and relocated, railroads found themselves with excess capacity. The PRR was particularly burdened with excess trackage; in many cases, it had four to six tracks where one or two would do. Even though this track was no longer needed, it was still on the tax rolls. West of the Allegheny Mountains, the NYC and PRR duplicated each other at almost every major point; east of the Alleghenies, the two hardly touched. Railroad historian George Drury commented that the merger resembled "a late-in-life marriage to which each partner brings a house, a summer cottage, two cars, and several complete sets of china and glassware — plus car payments and mortgages on the houses."
  Subpar track conditions deteriorated further, particularly in the Midwest, a result of inheriting decrepit facilities. Trains regularly operated at greatly reduced speeds, resulting in delayed shipments, excessive overtime accrued, and soaring operating costs. Derailments and wrecks were regular occurrences, particularly in the Midwest. In 1969, most of Maine's potato production rotted in the PC's Selkirk Yard, hurting the Bangor & Aroostook Railroad, whose shippers vowed never to ship by rail again. At one point, Penn Central was losing $1 million per day.
  Penn Central tried to diversify the troubled firm into real estate and other non-railroad ventures, but in a slow economy these businesses performed little better than the railroad assets. In addition, these new subsidiaries diverted management attention away from the problems in the core business. Management also insisted on paying dividends to shareholders to create the illusion of success. The company had to borrow additional funds to maintain operations. Interest on loans had become an unbearable 
caption: Cover of PC employee newsletter. Post-sheet metal worker A. A. Muhlbauer of Samuel Rea Shops in Hollidaysburg, Pennsylvania, uses hydraulic riveter to affix cap to cover seam of boxcar's roof sheets in PC's 1970 campaign to construct new cars to improve business.
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