| [CHAPTER I] | ||
| Baltimore & Ohio | 1 | |
| Early history—Extension to Chicago—Trunk-line rate wars—Effect on the company—Extension to New York—Sale of bonds to pay off floating debt—Unsatisfactory traffic conditions—Receivership—Mr. Little’s report—Reorganization—Subsequent history. | ||
| [CHAPTER II] | ||
| Erie | 34 | |
| Early history—Reorganization—Wall Street struggles—Financial difficulties—Second reorganization—Development of coal business—Extension to Chicago—Grant & Ward—Financial readjustment—New York, Pennsylvania & Ohio—Third reorganization—Later history. | ||
| [CHAPTER III] | ||
| Philadelphia & Reading | 75 | |
| Early history—Purchase of coal lands—Funding of floating debt—Failure—Struggles between Gowen and his opponents—Reorganization—Second failure and reorganization. | ||
| [CHAPTER IV] | ||
| Philadelphia & Reading | 118 | |
| Difficulties of the Coal & Iron Company—McLeod’s policy of extension—Collapse of this policy—Failure of company—Summary of subsequent history. | ||
| [CHAPTER V] | ||
| The Southern | 146 | |
| Richmond & Danville—East Tennessee, Virginia & Georgia—Formation of the Southern Railway Security Company—Growth and combinations—Failure and reorganization of the East Tennessee—Reversal of position between the Richmond & Danville and the Richmond & West Point Terminal—Acquisition of the Central of Georgia—Failure and reorganization of the whole system—Subsequent development. | ||
| [CHAPTER VI] | ||
| Atchison, Topeka & Santa Fe | 192 | |
| Charter—Strategic extensions—Competitive extensions—Effect on finances—Raise in rate of dividend—Reorganization of 1889—Acquisition of the St. Louis & San Francisco and of the Colorado Midland—Income bond conversion—Receivership—English reorganization plan—Mr. Little’s report—Final reorganization plan—Sale—Subsequent history. | ||
| [CHAPTER VII] | ||
| Union Pacific | 220 | |
| Acts of 1862 and 1864—High cost of construction—Forced combination with the Kansas Pacific and the Denver Pacific—Unprofitable branches—Adams’s administration—Financial difficulties—Debt to the Government—Receivership and reorganization—Later history. | ||
| [CHAPTER VIII] | ||
| Northern Pacific | 263 | |
| Act of 1864—Failure and reorganization—Extension into the Northwest—Villard and the Oregon & Transcontinental Company—Lack of prosperity—Refunding mortgage—Lease of Wisconsin Central—Financial difficulties—Receivership—Legal complications—Reorganization—Subsequent history. | ||
| [CHAPTER IX] | ||
| Rock Island | 311 | |
| Charter—Early prosperity—Reorganization of 1880—Conservative policy—Extension—Pays dividends throughout the nineties—Moores obtain control—Reorganization of 1902—Further extensions—Impaired credit of the company. | ||
| [CHAPTER X] | ||
| Conclusion | 334 | |
| Definition of railroad reorganization—Causes of the financial difficulties of railroads—Unrestricted capitalization and unrestricted competition—Problem of cash requirements—Problem of fixed charges—Distribution of losses—Capitalization before and after—Value of securities before and after—Provision for future capital requirements—Voting trusts—Summary. | ||
RAILROAD REORGANIZATION
CHAPTER I
BALTIMORE & OHIO
Early history—Extension to Chicago—Trunk-line rate wars—Effect on the company—Extension to New York—Sale of bonds to pay off floating debt—Unsatisfactory traffic conditions—Receivership—Mr. Little’s report—Reorganization—Subsequent history.
The Baltimore & Ohio Railroad was the first important railway company to be incorporated in the United States. It was designed to aid the city of Baltimore in securing the Western trade, and not only private citizens but the city of Baltimore and the state of Maryland early subscribed to its stock. When in the course of construction it became expedient to extend into Virginia, the city of Wheeling and the state of Virginia likewise subscribed, though the action of the latter was subsequently withdrawn.[1] As a result the funds required for first construction were obtained from the sale of stocks instead of bonds. In 1844, seventeen years after the granting of the charter, the annual report showed $7,000,000 in stock as against $985,000 in 6 per cent bonds; while in 1849, though the loans had been increased, they yet stood in the proportion of one to two.[2]
On December 1, 1831, the first train was run over the line, then 72½ miles in length.[3] The early history of the road does not much concern us. It was one of steady growth, not through an unsettled territory, as with our Western roads, but through a country the industries of which were already established. Tracks led, not into prairies, but to populous cities; and the future of the company, once the initial difficulties should have been overcome, was at no time uncertain. Thus extension to Cumberland increased the gross receipts from $426,492 to $575,235, and that to Wheeling in 1853 likewise brought a great increase in traffic.
The Civil War bore upon the Baltimore & Ohio heavily because of the peculiar location of its mileage. On May 28, 1861, possession was taken by the Confederates of more than one hundred miles of the main stem, embracing chiefly the region between the Point of Rocks and Cumberland.[4] Government protection was temporarily restored in 1862, but raids occurred until the end of the war. Each time the Confederates occupied the line they tore it up, and as soon as they retired the company hastened to make repairs. The road did not default. A portion of the track yielded a revenue from first to last, and presumably the Government paid generously for the transportation of its troops.
It was after the Civil War that the real history of the road began. The key-note was competition;—competition of the fiercest sort between parallel lines from Chicago to the seaboard, intensified by the rivalry of the great seaboard cities, and involving traffic in both directions. The decade 1850–60 had seen the extension of Eastern roads to Western connections. In 1851 the Erie had reached Lake Erie; in 1853 the New York Central and Lake Shore, and in 1855 the Pennsylvania and Fort Wayne had opened continuous routes from the Atlantic to Chicago. In 1857 the Baltimore & Ohio had obtained connection with Cincinnati and St. Louis; and in 1858 the Grand Trunk had arrived at Sarnia on its way from Portland to Chicago. After the Civil War there was both consolidation and extension. The New York Central was united with the Hudson River, and the Pennsylvania leased the Pittsburgh, Fort Wayne & Chicago in 1869. The Baltimore & Ohio reached Chicago in 1874, and the lines which in April, 1880, were consolidated into the Chicago & Grand Trunk were completed between Port Huron and Chicago in February of that year. The completion of these through routes opened the way for very bitter competition. Five independent lines struggled for Chicago business, and all of them were prepared to cut rates deeply in order to test their rivals’ strength. In particular the Baltimore & Ohio was aggressive. “At the time of its [Chicago branch] opening,” said Mr. Blanchard before the Hepburn Committee, “it was heralded all over the Northwest as a ‘Relief for the Farmer,’ ‘the Grangers’ Friend,’ and all other sorts of headlines were put into the Chicago and Northwestern papers; and President Garrett’s public utterances, and those to his Board, were filled with enough statements to show what he intended to do.... I heard him [say] that upon the completion of his lines, like another Samson, he could pull down the temple of rates upon the heads of these other trunk lines.”[5]