RAILROADS: Fight for the New Haven

• Share

(2 of 2)

The New Haven is a short-haul line through a densely populated area, with heavy commuter loads and relatively little freight. To make it pay, Dumaine has tried to chop down costs and at the same time modernize the road to attract business. Many of the big, barnlike stations of the '20s have been replaced by revenue-producing business blocks; Dumaine money built a $50 million marketing center in congested Boston near the South Station that draws some $200 million yearly in various businesses and fat contracts for the New Haven to haul the goods. At a cost of $70 million, the New Haven has been completely dieselized and electrified, now has some 1,300 new units, including 40 self-propelled Budd cars (the largest U.S. fleet), 362 new diesel-electric locomotives. Piggyback cars for carrying trucks have been increased until they produce $2,000,000 in revenue each year (100 more, plus 115 air-conditioned passenger cars are on order for 1954), and Dumaine has torn up 340 miles of track no longer needed and rebuilt 400 miles of roadbed at a cost of $10,000,000. Says he: "You must spend money to make money."

Buck Dumaine insists that McGinnis is wrong when he says the New Haven runs at a loss. In a proxy statement fired off this week, he argued that every railroad counts nonrailroad revenues in its profits. The fact is that the road's total revenues have increased steadily in the last five years to $165 million in 1953. Net income was equal to $12.16 a preferred share, with $7 disbursed in preferred dividends. The New Haven's debt has been cut by more than $50 million through retiring securities and the purchase of bonds, thus cutting interest charges by nearly $2,000,000 a year. Common stockholders got no dividends, says Dumaine, because of unpaid preferred dividends accumulated when the road was in the red. Some $26 a share has been paid off, and the balance now stands at only $4.

To the Last Proxy. Both Dumaine and McGinnis were supremely confident of winning control, but they knew the fight would be close. McGinnis and his allies own some 30% of the New Haven common and preferred stock (1,015,585 shares outstanding), claim that under the New Haven's cumulative-voting procedure,* they are sure to get eleven directors, enough to control the road.

Buck Dumaine is just as confident, thinks the question is not whether he will control the company but by how much. Family interests alone control some 28% of the stock (273,399 shares), and count on getting another 175,000 shares in stockholders' proxies, plus at least half of the 150,000 shares held by brokers. If he gets all of these, he will have more than enough to keep control.