Railroads: Toward the 21st Century Ltd.

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Saunders moved into the chairman's suite at Pennsy's Philadelphia headquarters only four years ago. He brought with him the bright reputation he had built as president of the Norfolk & Western, which he helped turn into one of the nation's most profitable railroads. He also brought a consuming energy that threatened to wear out associates. For he is a man who dotes on work. An average day includes twelve hours at the office, another three working at home—after which Saunders relaxes with a vengeance. He ordinarily takes a couple of double martinis before dinner, wine during the meal, and brandy plus two or three Scotches and soda afterward. Not long ago, at a reunion at Roanoke College, where Alumnus Saunders ('30) is now chairman of the trustees, a classmate told him: "You always were a lucky guy." Replied Saunders: "Yes, I suppose I was—but I have also noticed that the harder you work the luckier you get."

To work out his luck when he came to the Pennsy, Saunders had two major aims. One was to shake awake a slumbering, 121-year-old railroad that had stumbled onto hard times. Falling earnings and a high debt had led the road's conservative management to cut back on new spending; the Pennsy had hardly enough modern equipment to remain competitive. The new boss changed all that by allocating huge funds ($577 million in the last three years alone) for new equipment and by branching out into fields other than railroading. His other goal was to push through the merger with the New York Central, something that had been discussed and contemplated for years.

Tangled Midwest. To be sure, the merger trend among U.S. railroads is nothing new (see map). But the plans for the Penn Central were the most am bitious yet. As Saunders promoted them, his tireless determination seemed to promise eventual success. Inevitably, it gave new impetus to a growing roster of other corporate unions: ¶ In the East, the coal-rich Norfolk & Western and the Chesapeake & Ohio-Baltimore & Ohio are moving toward a merger that will probably be consummated some time in 1970. The C. & O. took effective control of the B. & O. five years ago in a move that enabled the limping B. & O. to use C. & O. credit ratings to buy new equipment ($312 million worth last year). Together, the two lines achieved savings averaging $35 million annually. By merging with the Norfolk & Western, they estimate that they can save another $30 million a year. The merger would create a system every bit as affluent as the Penn Central. It would include the Nickel Plate and the Wabash, already owned by the Norfolk & Western, as well as the Erie Lackawanna, Delaware & Hudson, and Boston & Maine, which the ICC already has ordered the Norfolk & Western to absorb.