SPSF Merger

The proposed merger between the Santa Fe and Southern Pacific Railroads in the 1980s, known as the SPSF merger, was a significant corporate consolidation effort aimed at creating a dominant railroad system in the Western United States. This ambitious venture, which combined two major railroads, was expected to revolutionize rail transportation in the region. However, despite high hopes and early initiatives, the SPSF merger ultimately faced insurmountable challenges and was met with regulatory obstacles.
==History of the SPSF Merger:==
Amid an era of major railroad mergers and acquisitions, the Atchison, Topeka and Santa Fe Railway and the Southern Pacific Transportation Company announced on September 27, 1983, that they too would merge. Both were major railroads in the Western United States at the time. The merger had long been seen as a logical move, especially since other recent mergers had turned the Burlington Northern Railroad and the Union Pacific Railroad into much larger western railroads, with about the same annual rail revenue of Santa Fe and Southern Pacific combined, and the nation's third-largest railroad.
In December 1983, both companies were acquired by a new holding company, the Santa Fe Southern Pacific Corporation, through a swap of approximately US$5 billion in stock. On March 23, 1984, Santa Fe Southern Pacific formally petitioned the Interstate Commerce Commission (ICC) to approve the merger of the two railroads, and while the application was pending, the Southern Pacific remained in a voting trust, and the railroads continued to be operated independently and competitively while the merger worked through the regulatory process. So confident the deal would be approved, the company began repainting their locomotives into a new unified paint scheme that would allow the future railroad to be called the SPSF Railway.
Immediately combined were the company's extensive non-railroad holdings. Santa Fe had holdings in gold mines in California and Nevada, and owned part of oil and gas complex in California valued at close to $2 billion. Southern Pacific owned more California real estate than any other corporation, with huge amounts of forest land and prime urban property including 200 acres in Downtown San Francisco and more than 150 acres near Disneyland, estimated to be worth as much as $5 billion.
The Justice Department and competing railroads strongly criticized the merger, but industry analysts largely expected the deal to be approved. In an argument for the merger, John J. Schmidt, the head of Santa Fe Southern Pacific, said in testimony in front of the ICC board that since 1982 Southern Pacific had either lost money or made very little profit each year, and suggested that Santa Fe was not financially healthy enough to survive independently. After the testimony, ICC staff recommended to the board that the merger be approved, with some conditions that he said the staff believed would solve the competition problem.
The company was stunned on July 24, 1986, when the ICC board rejected the proposed merger, saying that the anti-competitive problems outweighed the public benefits of joining the rail systems. Specifically, in the 4-1 decision, the ICC cited that the railroads had extensive parallel operations in California and across the Southwest, and that merging the lines would have a "substantial adverse effect" on competition.
The company quickly moved to strike a deal with competitor Union Pacific to grant them rights to use some of the Santa Fe and Southern Pacific tracks. The company also started the process of selling off some of its non-railroad businesses. After those changes, on December 9, 1986, the company appealed the ICC decision. On April 20, 1987, Santa Fe Southern Pacific Chairman and CEO John J. Schmidt resigned under pressure, reportedly ousted by the company's board of directors who were displeased with the way the merger was handled.
Ultimately, despite the changes, on June 30, 1987, the ICC declined to reconsider the merger and orders the company to sell one or both of the rail lines within two years.
Southern Pacific was sold to Rio Grande Industries for US$1.02 billion in October 1988, the companies California real estate holdings were spun off into a new company called Catellus Development Corporation which would become the State's largest private landowner, and the former holding company would rename itself Santa Fe Pacific Corporation and retain the Santa Fe Railroad and the remaining the non-railroad businesses of both predecessors.
In 1995, the Santa Fe railroad merged with Burlington Northern to form BNSF Railway, and the Southern Pacific was acquired by the Union Pacific Corporation the following year.*
=== The "Kodachrome" Paint Scheme: ===
The Santa Fe Southern Pacific Corporation was so confident the merger would be approved, the company began repainting their locomotives into a new unified paint scheme that would allow the future railroad to be called the SPSF Railway. Because the railroads were legally required to operate separately, the paint scheme included the letters SP or SF and an adjacent empty space where the other two letters could be added after the merger was approved.
This paint scheme, combining yellow, red, and black, has come to be called the Kodachrome paint scheme due to the colors' resemblance to those on the boxes that Kodak used to package its Kodachrome slide film (which was heavily used by railfans of the time). After the ICC's denial, railroad industry writers, employees of both railroads and railfans alike joked that SPSF really stood for "Shouldn't Paint So Fast".
The lettering was positioned on the locomotive sides so that the other half of the lettering could be added after the merger became official. Two ATSF EMD SD45-2s (ATSF #7219 and #7221) were painted with the full SPSF lettering to show what the unified paint scheme would look like after the merger was complete. One Santa Fe caboose was also painted with "SPSF" in a similar situation.
At the time of merger denial, approximately 306 ATSF locomotives, four ATSF cabooses, 10 ATSF slugs, 96 SP locomotives, and one SP caboose had been painted in this fashion. The two railroads made an effort to repaint locomotives in their standard paint schemes after the merger was denied. Santa Fe repainted all Kodachromes still on roster by 1990, while Southern Pacific's less numerous Kodachromes were repainted much more slowly; some remained active on the Union Pacific after the SP buyout.*
==Kodachrome units:==
=== Atchison, Topeka and Santa Fe: ===
File:ATSF Downhhill Caliente Aug 90 cropped.jpg|Santa Fe No. 9542
File:AT&SF 8085 in Needles, CA on April 9, 1987 (28159540004).jpg|Santa Fe No. 8085
=== Southern Pacific: ===
File:7561 Floriston June 86 - Flickr - drewj1946.jpg|Southern Pacific No. 7561
File:Souther Pacific Business Car Special (9191428621).jpg|Southern Pacific No. 7556
File:3207 Truckee Jan 86 - Flickr - drewj1946.jpg|Southern Pacific No. 3207
File:SPSF7551rja.jpg|Southern Pacific No. 7551
Category:Mergers
Category:Railroads
Category:Railways
Category:Companies
Category:SPSF
Category:SPSF Locomotives