Railroads: Toward the 21st Century Ltd.

(See Cover) No green light flared from a track-side tower; no warning whistle echoed down the line. But no trainman missed the signal. When the Supreme Court gave its approval last week to the merger of the Pennsylvania and New York Central railroads, it was clearing the track for the nation's entire rail system. It was giving railroad management permission to highball into the future.

As Justice Abe Fortas read the 37-page opinion that put an end to ten years of frustrating negotiation and deliberation, the smile on the face of a chunky, balding spectator seemed to light up the marbled chamber. For Stuart Thomas Saunders, 58, the man who has already been picked to head the Pennsylvania New York Central Transportation Co., the court's 8-0* vote was a singular personal triumph.

It was Saunders, as chairman and chief executive officer of the Pennsylvania, who planned the tactics and organized the arguments that led to one of the largest mergers in corporate history. It was Saunders who held the pieces together during the frequent assaults from competitors concerned about the Penn Central's potential power; it was Saunders who won over dubious labor leaders, worried lest future economies lead to fewer jobs. Above all, it was Saunders, the lawyer-turned-railroader, who convinced the Interstate Commerce

Commission and the Justice Department that both public interest and private good would be helped if two troubled rivals were allowed to operate as a unit, instead of continuing costly and wasteful competition. His victory was a victory for railroads across the country. For the court gave its approval to his philosophy that railroads must combine, that they must grow in size and decline in number if they are to serve their customers and survive.

Envious Hill or Harrimcm. Saunders will be working in tandem with the Central's President Alfred E. Perlman, 65, one of the best operating men in the business; and the two men will be managing a railroad empire to excite the envy of a Hill or a Harriman. The Penn Central will operate on 40,000 miles of track in 14 states and two Ca nadian provinces. It will run 4,200 locomotives, 195,000 freight cars, and 4,937 passenger cars. It will also be the nation's largest private landlord, with real estate holdings that include Park Avenue hotels and a Pittsburgh office building-apartment complex, a 25% share in the new Madison Square Garden, erected over the rebuilt Pennsylvania Station in New York City, resorts in Florida, parks in Texas and housing developments in California. The diversified corporation will have total assets of $6.3 billion, annual revenues of almost $2 billion, and tidy tax-loss credits from dismal years in the past that will help to improve net income for years to come. Most of all, in its plans and in its performance, Penn Central will be a prototype of the U.S. railroad of the future.