RAILROADS: Danger Signal

Were U.S. railroads pricing themselves out of business? The Interstate Commerce Commission thought so. Since war's end, the railroads have asked for, and received, seven freight-rate increases, but freight revenues have been slipping anyway. Last week ICC reluctantly handed out an eighth increase (an average of 3.7%), boosting freight rates—and shippers' bills—an estimated $293 million annually. The commission also handed down a warning: the railroads' higher rates are diverting more & more business to trucks, a trend that "is too impressive and formidable to be ignored."

Railroadmen knew that this was true. The net income of Class I railroads had dropped from $262 million in 1948's first half to $173 million in the first six months this year. Much of the diverted freight was picked up by truckers. They netted $40.5 million in 1947, nearly doubled that last year with $73.4 million, and their traffic was still rising.

But the railroads did not know how to buck the trend, as long as labor costs kept rising and income dropping. Since 1939, railroad freight rates had been increased 57%. All told, the railroads will collect an estimated $3 billion more a year for freight hauling than under the 1939 rates. Meanwhile wages have been boosted 86% —and next month's reduction of the work week from 48 to 40 hours will cost another $380 million a year.